REAL     ESTATE 

PRINCIPLES  AND  PRACTICES 


. 

REAL  ESTATE 

PRINCIPLES    AND    PRACTICES 


BY 

PHILIP  A.  BENSON,  B.C.S.,  C.P.A. 

/, 
LECTURER  ON   REAL  ESTATE,  NEW  YORK  UNIVERSITY 

AND 

NELSON  L.  NORTH,  JR.,  LL.M. 

LECTURER  ON   REAL  ESTATE,  NEW  YORK  UNIVERSITY 


NEW  YORK 

PRENTICE-HALL,  Inc. 
1924 


COPYRIGHT,   1922,  BY 

PRENTICE-HALL,  INC. 

Printed  in  the  United  States  of  America 

AH  rights  reserved 


Endorsement  of  the  National  Association  of 
Real  Estate  Boards. 

"Real  Estate — Principles  and  Practices"  is  the 
most  comprehensive  general  text-book  yet  written 
for  the  real  estate  field. 

The  work  is  admirable  in  scope,  thorough  in 
treatment,  and  clear  in  style.  It  appeals  not  only 
to  the  student  of  underlying  principles,  and  to  the 
worker  interested  in  approved  practices,  but  to  the 
citizen  conscious  of  his  need  for  enlightenment 
on  matters  basic  to  the  everyday  activities  of  his 
community. 

"Real  Estate — Principles  and  Practices,"  with 
its  appendices  of  forms  and  tables,  is  a  manual  of 
real  estate  service,  and  its  timely  merit  is  recog- 
nized with  appreciation  by  The  National  Associa- 
tion of  Real  Estate  Boards. 


-~ 

7 


Chairman,  Publication  Council, 

National  Association  of  Real  Estate  Boards. 


PREFACE 

THE  real  estate  business  is  one  which  engages  the  atten- 
tion of  a  large  number  of  people.  Real  estate,  that  is, 
land  and  buildings  and  all  the  varied  interests  in  them,  is 
of  importance  to  nearly  every  one.  It  is  logical  then  that 
a  course  on  real  estate  should  be  included  in  the  curriculum 
of  a  University  School  of  Commerce. 

The  present  work  is  designed  primarily  as  a  college  text- 
book. It  is  written  for  the  benefit  of  the  student,  and  aims 
to  make  the  principles  and  practices  of  the  business  of  real 
estate  comprehensible  to  the  lay  mind.  The  book  is  not 
a  law  book  but  necessarily  includes  discussions  of  some  of 
the  legal  principles  governing  real  estate  transactions. 

The  need  for  a  book  on  real  estate  for  use  by  business 
men  has  been  felt.  It  is  hoped  that  those  actually  engaged 
in  the  real  estate  business,  or  whose  interests  bring  them 
in  contact  with  real  estate  affairs,  will  find  that  this  book 
fills  such  a  need. 

Grateful  acknowledgment  is  made  of  the  debt  of  the 
authors  to  the  late  Walter  Lindner,  Esq.,  whose  earlier 
work  on  the  subject  published  by  the  Alexander  Hamilton 
Institute  and  used  as  a  text-book  at  New  York  University 
School  of  Commerce,  Accounts  and  Finance,  has  been  a 
guide  in  the  preparation  of  this  volume. 

Philip    A.    Benson 
Nelson    L.    North,    Jr. 


CONTENTS 

OTAPTER  FACE 

I.  INTRODUCTORY ! 

Real  estate  a  business ;  Ethics  of  the  business ;  Divisions  of  the  busi- 
ness; Agency;  Property;  Realty  and  Personalty;  Real  property  and 
personal  property;  Real  estate;  Fixtures. 


II.  INTERESTS  IN  REALTY 8 

Limitations  upon  ownership;  Police  power;  Escheat;  Eminent 
domain;  Right  of  taxation;  Estates  and  chattel  interests;  Fee 
simple;  Fee  upon  condition  and  fee  determinable;  Life  estates  and 
remainders;  Dower;  Curtesy;  Joint  interests  in  land;  Tenancy  in 
common;  Joint  tenancy;  Estate  by  the  entirety;  Title  to  real 
property;  Title  by  descent;  Title  by  will;  Title  by  voluntary  aliena- 
tion; Title  by  involuntary  alienation. 

III.  LIENS 14 

Liens ;  Lien  of  mortgage ;  Taxes  and  assessments ;  Mechanic's  liens ; 
Enforcement  of  mechanic's  lien;  Discharge  of  mechanic's  lien; 
Judgments;  Discharge  of  judgment;  Attachments;  Lien  of  decedent's 
debts;  Transfer  tax;  Federal  estate  tax;  Corporation  franchise 
tax;  Conditional  bill  of  sale;  Other  encumbrances;  Not  true  liens; 
Priority  of  liens. 

IV.  TAXES,  ASSESSMENTS  AND  WATER  RATES  .     .      24 

Lien  of  taxes;  Various  tax  levies;  Determination  of  amount  of  tax; 
The  Budget;  Assessed  valuations;  Reduction  of  assessed  valuation; 
Certiorari;  Taxes  in  New  York  City;  Assessments;  Definition  of 
assessments;  How  assessments  are  levied;  Assessments  laid  by 
authority  of  the  courts;  Assessments  laid  by  board  of  assessors; 
When  assessments  become  liens ;  Water  rates ;  Enforcement  of  lien 
of  taxes. 

V.  CONTRACTS 38 

Importance;  Definition;  Competent  parties;  Offer  and  acceptance; 
Consideration;  Legality  of  object;  Necessity  of  writing;  Form  of 
contract;  Divisions  of  contract;  Description  of  property;  Street 
numbers;  Lot  number  on  map;  Metes  and  bounds;  Monu- 
ments; Selection  of  form  of  description;  Use  of  terms  "more  or 
less"  Description  of  improved  property;  Limitations  and  restric- 
tions Financial  statement;  Deposit  on  contract;  Cash  on  closing; 
Exist  ng  mortgage;  Purchase  money  mortgage;  Installment  con- 
tracts; Closing  date  and  place;  Miscellaneous  provisions;  Provision 

V 


vi  CONTENTS 

CHAPTER  pACE 

for  broker's  commission;  Apportionment  of  water  charges;  Street 
rights;  Form  of  deed;  Existing  mortgage;  Violations  of  municipal 
ordinances;  Personal  Property;  Deposit  money  a  lien;  Loss  in  case 
of  fire;  Binding  on  heirs  and  executors;  Execution  of  the  contract; 
Non-performance  of  contracts;  Contracts  for  exchange  of  real 
estate;  Form  of  contract  for  exchange;  Divisions  of  the  contract; 
Financial  statement. 

VI.  AUCTION    SALES 65 

Definition  and  kinds  of  auction  sales;  Involuntary  auction  sales; 
The  sale;  Description  of  terms  of  sale;  Fraudulent  bidding;  Protec- 
tive bidding;  Terms  of  sale;  Successful  auction  sales. 

VII.  DEEDS 72 

Purpose  of  deed ;  Form  of  deed ;  Consideration ;  Expression  of  con- 
sideration; Granting  clause;  Description;  Appurtenances;  Haben- 
dum;  Testimony  clause;  Signature;  Seal;  Witness;  Acknowledg- 
ment; Quit  claim  deed;  Bargain  and  sale  deed  with  convenants; 
Covenant  against  grantor's  acts;  Full  covenant  and  warranty  deed; 
Seizin;  Incumbrances;  Quiet  enjoyment;  Further  assurance;  War- 
ranty; Effect  of  covenants. 

VIII.  BONDS   AND    MORTGAGES 83 

Purpose  of  bonds  and  mortgages;  Form  of  bond;  Acknowledgment 
of  indebtedness;  Promise  to  pay;  Repayment  in  installments; 
Default  clause;  Execution  of  bond;  Enforcement  of  bond;  Usury; 
Taxation;  History  of  mortgage  lending;  Form  of  mortgage;  State- 
ment of  the  obligation;  The  pledge;  Purchase  money  mortgages; 
Covenants;  Special  clauses;  Sale  in  one  parcel;  Brundage  clause; 
Release  clause;  Clauses  in  junior  mortgages;  Lifting  clause; 
Special  Forms  of  mortgages;  Building-loan  mortgage;  Trust  mort- 
gages ;  Satisfaction  of  mortgage ;  Mortgagee  in  possession ;  Fore- 
closure by  advertisement;  Legal  foreclosure. 

IX.  TRANSFER  AND   EXAMINATION   OF   TITLE   AND 
TITLE  INSURANCE .101 

The  statute  of  frauds ;  Present  methods  of  transferring  title ;  Title 
by  descent;  Title  by  will;  Title  by  voluntary  alienation;  Title  by 
involuntary  alienation;  Recording  of  conveyances;  Proof  of  execu- 
tion; Examination  of  records;  The  title  examiner;  Title  insurance; 
Use  of  title  policy;  Necessity  for  survey;  Encroachments  on  others; 
Encroachment  by  others;  Survey  in  building  operations;  Survey  in 
land  developments. 

X.  CLOSING  OF  TITLE 114 

When  title  passes;  Delivery  in  Escrow;  The  title  closing;  Encum- 
brances subject  to  which  the  purchaser  takes  title;  Encumbrances  to 
be  removed;  Instruments  to  be  delivered;  Adjustments;  Closing 
exchanges,  leaseholds  and  loans;  Rejection  of  title. 


CONTENTS  vii 

CHAPTER  PACB 

XL  LEASES         122 

Landlord  and  Tenant;  Leases;  Rent;  Term  of  lease;  Verbal  and 
written  leases;  Monthly  tenancies;  Indefinite  tenancies;  Tenancy 
for  term  of  year  or  years;  Ground  lease;  Termination  of  leases; 
Dispossess  proceedings;  Emergency  rent  laws;  Form  of  lease;  Re- 
pairs; Improvements;  Liens;  Security  furnished  by  tenant;  Addi- 
tional charges  paid  by  tenant;  Fire  clause;  Assignment  and  mort- 
gaging of  lease  and  sub-lettings;  Use  of  the  premises;  Compliance 
with  orders  of  governmental  authorities;  Guarantors  and  sureties; 
Tenant  liable  after  re-entry;  Right  of  redemption ;  Tenant  to  indem- 
nify landlord  for  damages;  Leases  subordinate  to  mortgages;  Cov- 
enants by  landlord. 

XII.  BROKERAGE .139 

Definition  of  a  broker;  Compensation  of  brokers;  Qualifications  of  a 
broker;  The  broker's  business;  The  mortgage  loan  broker;  Manage- 
ment; Essentials  of  success;  The  broker's  authority;  May  not  act 
for  both  parties;  Sharing  in  profits;  Broker  must  be  employed; 
When  commission  is  earned;  Broker  procuring  cause  of  sale; 
General  rules  as  to  earning  commission;  Deferring  or  waiving 
commissions ;  Who  pays  the  commission ;  Commissions  on  exchanges, 
loans  and  rentals;  Duty  of  principal  to  broker;  Duty  of  broker  to 
principal;  Statements  made  by  a  broker;  Termination  of  agency; 
Rates  of  commissions. 

XIII.  MANAGEMENT 151 

Management  as  a  business;  Principles  governing  management; 
Choice  of  a  manager;  Renting  space;  Collections;  Expenditures; 
Physical  care  of  the  property;  Accounting;  Insurance;  Agent's  re- 
lations with  the  tenant;  Agent's  relations  with  the  owner;  Compen- 
sation of  Manager. 

XIV.  THE  VALUATION  OF  REAL  ESTATE  .     .     .     .     158 

Theory  of  land  values;  Actual  or  potential  rent  a  measure  of 
value;  Comparisons  of  values  with  respect  to  use  of  land;  General 
rules  for  determining  land  values;  Prices  paid  at  auction  sales; 
The  unit  of  value;  Lots  of  greater  or  less  depth  than  a  typical  lot; 
The  Hoffman  and  Davies  rules;  Value  affected  by  width  and  shape 
of  lot;  Plottage;  Corners  and  corner  influence;  Illustration  of 
method  of  computing  valuations;  Valuation  of  improved  property; 
Cost  of  buildings;  Values  computed  from  rentals;  The  work  of  the 
appraiser  in  condemnation  proceedings;  Consequential  damages. 

XV.  MORTGAGE  LOANS •     174 

The  demand  for  mortgage  loans ;  Why  it  pays  the  owner  to  borrow 
part  of  the  cost;  Lenders  of  mortgage  money;  Mortgage  loans  com- 
pared with  other  investments;  Safety  in  mortgage  lending;  Amorti- 
zation; Advantages  of  a  good  bond;  Fire  insurance  a  necessity;  The 
federal  farm  loan  act;  Western  farm  mortgage  brokers;  The 
Chicago  or  Straus  plan  of  real  estate  financing;  Guaranteed  mort- 
gages; Building  loans;  Participating  mortgages;  Collateral  trust 
real  estate  bonds;  Unsound  debenture  issues;  Mortgage  loan 
brokers ; 


viii  CONTENTS 

CHAPTER  PAGE 

XVI.  THE  WORK  OF  THE  ARCHITECT   ....     193 

The  architect's  relation  to  real  estate;  Preliminary  rough  sketches; 
Working  drawings;  Specifications;  The  architect's  services; 
Methods  of  payment  for  work;  Decisions  by  the  architect;  necessary 
certificates;  Planning  buildings. 

XVII.  THE  TORRENS  SYSTEM  OF  LAND  TITLE  REGIS- 
TRATION               200 

Origin  of  the  system;  The  system  in  England;  The  system  in  the 
United  States;  Definition  of  the  Torrens  system;  The  law  in  New 
York;  Arguments  in  favor  of  the  Torrens  system;  Objections  to 
Torrens  system. 

THE  APPENDICES  213 


CONTENTS   OF  FORMS 

PAGE 

Notice  of  Mechanic's  Lien — New  York 215 

Conditional  Bill  of  Sale 216-218 

Chattel  Mortgage 219 

Facts  to  Ascertain  Before  Drawing  Contract  of  Sale 220 

Contract  of  Sale — California t  220-222 

Contract  of  Sale — Pennsylvania 222-223 

Option  to  Purchase — Massachusetts 223-224 

Contract  of  Sale — Massachusetts 224-225 

Sale  Contract — Ohio 225-226 

Contract  of  Sale — Illinois 226-227 

Real  Estate  Board  Sale  Contract 228-229 

Installment  House  Contract 229-231 

Installment  Lot  Contract 231-235 

Contract  to  Sell  with  Building  Loan 235-238 

Acknowledgment — New  York   (By  Individual)         239 

Acknowledgment — New  York   (By  Corporation) 239 

Acknowledgment — New  York   (By  Subscribing  Witness)         ....          239 

Acknowledgment — New  York   (By  Firm — One  Partner) 240 

Acknowledgment — New    York     (By    Husband    and    Wife    Known    to 

Officer)         240 

Acknowledgment— New  York  (By  Attorney  in  Fact) 240 

Acknowledgment — New  Jersey 241 

Acknowledgment — Ohio 241 

Acknowledgment — Massachusetts 241 

Acknowledgment — California u: 242 

Acknowledgment — Illinois 242 

Acknowledgment — Pennsylvania 242 

Acknowledgment  Before  Consular  Officer 242-243 

Acknowledgment  Before  Foreign  Commissioner 243 

County  Clerk's  Certificate •     •     •          243 

Specimens  of  Auction  Sale  Advertisements 244-246 

Deed— New  Jersey 247-248 

Warranty  Deed— California       . 248-249 

Fee  Simple  Deed — Pennsylvania •     •     •     •  249-250 

Warranty  Deed— Massachusetts 

Deed,  Statute  Form— Massachusetts 

Warranty  Deed— Ohio 251-252 

Examples  of  Restrictive  Covenants 252-25 

Mortgage— New  Jersey •     •  254-255 

Mortgage— California       . 255-257 

Mortgage — Pennsylvania 2 

Trust  Deed— Illinois 259-261 

0 (\*) 

Mortgage — Illinois 

Mortgage — Ohio     .......    « • 


x  CONTENTS  OF  FORMS 

PAGE 

Mortgage  Statute  Form — Massachusetts 264-265 

Mortgage — Massachusetts .  265-266 

Mortgage— New  York  (Old  Form) 267-269 

Assignment  of  Mortgage — With  Covenant 270 

Satisfaction  of  Mortgage 271 

Extension  of  Mortgage 271-272 

Subordination  Agreement 272-273 

Release  of  Part  of  Mortgaged  Premises 273-274 

Specimen  of  Release  Clause  for  Insertion  in  Mortgage 274 

Specimen  of  Release  Clause  for  Use  in  Release  Agreement  ....  275 
Subordination  and  Default  Clauses  for  Use  in  Junior  Mortgages  .  .  275-276 

Building  Loan  Agreement 276-277 

Building  Loan  Mortgage 278-279 

Certificate  of  Completion  of  Building 280 

Measurement  Tables 280-281 

Rules  for  Measuring  Land 281 

Specimen  of  Abstract  of  Title 282-283 

Specimen  of  Survey 284 

Upon  the  Closing  of  Title  the  Seller  Should  be  Prepared  with  the 

Following 284-285 

Upon  the  Closing  of  Title  the  Purchaser  Should  be  Prepared  with  the 

Following 285 

Affidavit  of  Title 286 

Estoppel  Certificate — From  Owner 287 

Estoppel  Certificate — From  Junior  Mortgagee  .  ;.:- 287 

Bill  of  Sale— With  Affidavit  of  Title  .....  .  .  y  ...  288 

Form  of  Statement  of  Closing  Title I  .  :.:  .  289 

Lease 289-290 

Lease— Gilsey  Form 290-292 

Specimen  of  Long  Form  of  Lease  ............  292-296 

Agreement  Guaranteeing  Payment  of  Rent :.;  .  .  297 

Schedule  of  Commissions  and  Charges 297-298 

Schedule  of  Real  Estate  Commissions 298-299 

Schedule  of  Commissions  and  Charges — Cook  County  Real  Estate  Board  299-303 

Schedule  of  Broker's  Commissions 303-305 

Schedule  of  Commissions  and  Charges 306-309 

Brokerage  Agreement — Cook  County  Real  Estate  Board  .  .  .  .  .  309-310 

Application  for  First  Mortgage  Loan M  •  311 

Description  of  Loan 312-313 

Broker's  Listing  Card 313 

Agency  Contract M  .  .  314-315 

Complaint  .......: ......  315 

Building  Manager's  Order  Form 316 

Appraisal  of  Real  Estate >  .  .  316 

The  Hoffman  Rule  for  the  Valuation  of  Short  Lots 317 

Davies  Rule 318-326 

Agreement  Between  Owner  and  Architect 326-329 

Agreement  Between  Owner  and  Contractor 329-332 

Torrens  Law— Registrar's  Certificate  of  Title— New  York  .  .  .  .  332 


REAL  ESTATE 
PRINCIPLES  AND   PRACTICES 

CHAPTER  I 

INTRODUCTORY 

Real  estate  a  business. — Since  the  time  mankind  ceased 
nomadic  existence  and  took  up  fixed  habitations,  land  and 
buildings  thereon  and  interests  therein  have  been  the  subject  of 
commercial  transactions.  Large  areas  of  the  earth's  surface 
are  now  privately  owned,  improved  in  many  cases  with  very 
valuable  buildings  and  in  populous  communities  the  land  rep- 
resents a  large  part  of  the  wealth  of  the  community.  It  is 
bought  and  sold,  improved,  managed  and  variously  dealt  in  con- 
stantly. This  has  given  rise  to  the  real  estate  business  which 
engages  the  attention  of  many  persons;  from  the  man  who  buys 
a  home  only  a  few  times  during  his  life,  to  the  man  whose  entire 
time  is  devoted  to  the  business  either  for  himself  or  others. 

Ethics  of  the  business. — In  every  real  estate  transaction  the 
parties  must  be  governed  by  the  highest  ideals  of  fair  dealing 
and  honesty.  This  does  not  require  either  party  to  give  away 
any  fair  advantage,  nor  confide  to  the  other  his  motives  or  ne- 
cessities. Neither  is  'he  required  to  relax  in  the  least  his  good 
judgment.  But  failure  is  certain,  soon  or  late,  to  overtake  him 
who  goes  beyond  the  truth  in  his  representations  or  having  once 
given  his  promise  or  agreement,  fails  to  live  up  to  it.  And  this 
is  so  even  if  the  agreement  be  not  legally  enforceable.  Taking 
advantage  of  catch-words  and  technical  phrases  may  ;seem 
desirable  at  the  time,  but  the  successful  real  estate  man  will  re- 
deem his  promise  even  when  to  do  so  results  in  loss  to  him,  for  he 
knows  that  a  good  reputation  is  his  most  valuable  asset.  Others 
will  deal  with  him  when  they  know  his  word  can  be  relied  on, 
for  it  is  not  always  convenient  to  put  all  relations  on  a  legally 
enforceable  basis.  Consequently  the  man  whose  standard  is 
high  finds  his  business  constantly  increasing,  while  the  one  in 
whom  full  reliance  cannot  be  placed,  soon  finds  himself  with 

little  if  any  business. 

i 


2     REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

Divisions  of  the  business. — Taking  the  view  that  every 
transfer  of  realty  or  an  interest  therein  is  a  transaction  within 
the  meaning  of  the  Real  Estate  business,  we  must  divide  the 
business  into  two  general  divisions,  INACTIVE  and  ACTIVE. 
The  INACTIVE  or  INVESTMENT  branch  of  the  business  is 
engaged  in,  usually  not  as  the  primary  source  of  livelihood,  but 
rather  for  income  or  personal  use.  The  man  who  has  savings 
from  his  vocation  or  accumulated  capital  from  any  source, 
seeking  investment  for  it  may  turn  to  real  estate  and  there  place 
his  money.  His  desire  is  to  have  his  money  earn  him  a  profit 
without  devoting  his  time  to  the  business. 

The  investment  branch  of  the  business  may  be  divided  into 

1.  Purchase  for  own  use. 

2.  Purchase  for  income  from  rents. 

3.  Purchase  to  hold  for  resale  at  higher  price. 

4.  Mortgage  lending. 

Purchase  for  own  use  occurs  in  the  case  of  the  acquisition  of 
business  of  factory  property  by  a  business  firm  or  a  residence 
by  an  individual.  In  neither  of  the  foregoing  transactions  is 
there  any  active  engagement  in  the  real  estate  business,  the 
entry  into  the  business  being  merely  incidental  to  some  other 
desire  or  purpose. 

Many  persons  look  with  favor  upon  ownership  of  income 
producing  property,  as  an  investment.  They  buy  a  building, 
collecting  the  rents  either  personally  or  through  an  agent,  pay 
the  carrying  charges,  looking  to  the  net  return  to  pay  them  a 
profit  on  the  money  invested.  Usually  all  work  is  done  by  an 
agent,  the  investor  merely  receiving  a  statement  at  intervals. 

An  example  of  (3)  is  the  purchase  of  unimproved  land 
adjacent  to  a  growing  community,  the  investor  expecting  to  pay 
the  taxes  and  other  charges  for  several  years,  looking  for  no 
immediate  return  upon  his  money  invested,  but  expecting  ulti- 
mately, that  the  growth  of  the  community  will  increase  his  land 
value  sufficiently,  so  that  he  will  be  enabled  to  sell  at  a  price 
which  will  net  him  a  profit  above  the  original  cost  of  the  land, 
together  with  the  carrying  charges  during  the  time  he  has 
owned  it. 

Thousands  of  people  throughout  the  country  invest  part  or 
all  of  their  savings  in  mortgages  upon  real  estate.  They  loan 
a  certain  sum  upon  the  security  of  realty  deriving  profit  in  the 
receipt  at  regular  intervals  of  interest  on  the  money  loaned. 

The  ACTIVE  branch  of  the  Real  Estate  business  includes  all 


INTRODUCTORY  3 

persons  who  devote  all  or  most  of  their  time  to  the  business  as 
a  means  of  livelihood.  They  not  only  utilize  money  capital  if 
required  but  contribute  time  and  labor.  This  branch  is  divided 
into  OPERATION  and  AGENCY. 

Operation  is  the  use  of  capital  in  commercial  transactions 
in  real  estate.  Realty  is  made  the  subject  matter  of  trade. 
The  operator  buys  and  sells,  constantly  using  his  capital  in 
successive  transactions ;  his  success  depends  on  rapid  turnovers. 
Operation  may  have  to  do  with. 

1.  Land. 

2.  Buildings. 

3.  Mortgage  lending. 

The  operator  in  land  acquires  it,  either  upon  speculation  for 
resale  at  a  profit  as  it  stands  or  for  development  and  resale. 
In  the  first  instance  the  operator  has  no  intention  of  holding 
the  land  for  any  great  length  of  time  as  in  subdivision  (3)  of 
the  inactive  branch  of  the  business  but  either  expects  a  rise  in 
value  very  rapidly  or  believes  he  can  find  a  purchaser  at  once 
for  a  higher  price  than  he  paid,  which  will  result  in  profit  to 
him.  If  such  rise  does  not  occur,  he  will  sell  to  release  his 
money  for  other  use.  The  operator  will  often  develop  the 
land  when  he  purchases  it  in  an  unimproved  condition.  He 
subdivides  it  into  streets  and  building  lots  of  marketable  size, 
lays  out  streets,  curbing  and  sidewalks,  instals  water,  gas  and 
electric  light  supply,  and  having  done  so  hopes  to  sell  the  lots 
for  a  sufficient  aggregate  amount  to  net  him  a  profit,  after  pay- 
ment of  the  original  cost  of  the  ground,  plus  the  expenses  of  the 
improvements. 

Operation  in  buildings  may  be 

1.  Speculative  erection. 

2.  Erection  for  investment. 

3.  Speculative  buying  and  selling. 

4.  Alterations. 

In  speculative  erection  the  operator  purchases  one  or  more 
lots,  erects  a  building  or  buildings  thereon  with  the  expectation 
of  being  able  to  sell  the  land  and  buildings  for  sufficient  to  pay 
him  a  profit  over  and  above  the  cost  of  the  land  and  the^build- 
ings.  In  erection  for  investment  the  operator  proceeds  just  as 
in  speculative  building,  except  that  his  final  intent  is  not  to  sell 
the  buildings  but  to  retain  and  use  them  either  for  his  own  oc- 
cupancy or  to  derive  a  profit  from  the  rentals.  In  this  phase  of 
operation  the  operator  ceases  to  act  as  such,  as  soon  as  the 


4     REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

buildings  are  completed,  and  thereafter  comes  within  the  inac 
tive  or  investment  branch  of  the  business. 

Speculative  buying  and  selling  of  buildings  is  similar  t< 
speculation  in  land.  The  operator  either  thinks  he  can  buy  thi 
building  for  less  than  he  can  get  for  it  on  immediate  resal< 
or  believes  the  price  will  very  soon  rise  and  he  be  enabled  t< 
sell  at  a  profit. 

Many  operators  have  of  late  years  engaged  in  alteratioi 
work.  An  old  building  is  purchased  which,  by  reason  of  an 
tiquated  equipment,  produces  little  or  no  profit.  The  operate 
then  alters  and  improves  the  building,  modernizing  it,  so  that  i 
will  produce  much  higher  rents,  and  he  is  then  in  position  t< 
sell  it  at  a  profit  over  the  original  cost  plus  the  expense  of  al 
teration. 

Mortgage  lending  as  an  operation  in  real  estate  must  not  bi 
confused  with  subdivision  (4)  of  the  Inactive  Branch  of  th< 
business.  la  the  investment  class  the  lender  makes  the  loai 
and  seeks  his  profit  from  the  interest  paid  by^  the  borrowe 
from  time  to  time.  As  an  operator  the  lender  makes  his  profi 
on  a  fee  which  he  is  paid  for  making  the  loan.  He  has  m 
intention  of  holding  the  mortgage,  but  at  once  sells  it  to  an  in 
vestor,  thus  releasing  his  capital  for  use  again. 

Under  this  subdivision  are 
1    Permanent  loans. 

2.  Building  loans. 

3.  Combination  building  and  permanent  loans. 

A  permanent  loan  is  made  for  a  definite  period  (usually 
three  or  more  years)  at  a  fixed  rate  of  interest,  upon  the  secur 
ity  of  a  mortgage  upon  property,  which  is  to  remain  in  it 
present  general  condition — such  for  example  as  a  mortgage  01 
a  building.  A  building  loan  is  made,  as  the  name  implies,  t< 
supply  all  or  part  of  the  funds  to  erect  a  building.  The  loai 
is  made  under  the  terms  of  a  building  loan  agreement  whicl 
provides  usually  that  the  borrower  is  to  erect  on  the  property 
covered  by  the  mortgage,  a  certain  kind  of  building,  and  tha 
the  amount  of  the  loan  is  to  be  paid  him  in  instalments,  as  th< 
building  progresses,  each  instalment  bearing  interest  from  thi 
time  it  is  paid.  When  the  building  is  completed  the  loan  i; 
payable  to  the  lender,  the  theory  being  that  the  builder  will  sel 
the  building  as  soon  as  completed,  and  from  the  proceeds  o 
the  sale  repay  the  loan.  In  most  instances  the  purchaser  fron 
the  builder  desires  the  loan  to  remain  on  the  property.  Thi; 


INTRODUCTORY  5 

has  resulted  in  the  combination  building  and  permanent  loan 
which  is  exactly  the  same  as  a  building  loan,  except  that  the 
loan,  like  a  permanent  loan,  is  not  payable  until  the  expiration 
of  a  fixed  period.  Thus  the  builder  is  enabled  to  obtain  funds 
to  finance  his  building  operation,  and  continue  the  loan  for  the 
benefit  of  his  purchaser.  (Appendix  forms  54  and  55.) 

Agency.— That  branch  of  the  active  real  estate  business, 
known  as  agency,  is  the  dealing  in  or  with  real  estate  for  or  on 
behalf  of  others.  More  persons  by  far  are  engaged  in  this 
class  of  the  business  than  in  any  other.  Since  the  agent  is  not 
dealing  with  his  own  mtoney,  his  compensation  is  a  share,  usually 
a  percentage,  of  the  amount  involved.  Agency  has  two  general 
subdivisions  (a)  brokerage  and  (b)  management. 

In  brokerage  the  agent,  by  reason  of  his  acquaintance  and 
knowledge,  is  engaged  in  the  task  of  bringing  together  per- 
sons desiring  to  make  transactions  in  real  estate,  whether  to 
buy,  sell,  exchange,  lease,  loan,  or  borrow  on  mortgage.  In 
such  transactions  the  broker's  compensation  is  known  as  "com- 
mission" the  amount  of  which  is  usually  based  on  the  value  of 
*he  real  estate  or  interest  therein  and  is  fixed  by  custom  or 
agreement. 

Management  is  that  phase  of  the  real  estate  business  in  which 
the  agent  takes  charge  and  control  of  real  estate  for  the  owner. 
He  collects  rents,  leases  space,  arranges  for  and  superintends 
repairs  and  attends  to  the  general  upkeep  of  the  property. 
To  be  successful  his  aim  is  to  secure  rentals  as  high  as  possible 
while  keeping  carrying  charges  as  low  as  proper  care  of  the 
property  will  permit.  His  compensation  is  usually  a  percentage 
of  the  amount  of  rents  collected.  In  most  real  estate  offices 
the  management  business  is  carried  on  by  a  trained  force  of  em- 
ployees, the  profit  upon  such  business  being  sufficient  often  to 
pay  the  carrying  charges  of  the  office.  This  relieves  the  agent 
of  the  details  of  management,  except  for  general  supervision, 
and  frees  his  time  for  the  more  interesting  and  lucrative  work 
of  brokerage. 

Any  business  necessarily  implies  commercial  transactions  in 
a  corrjmodity.  One  engaging  in  business,  whatever  it  is,  must 
know  his  commodity^or  stock  in  trade,  know  how  to  transfer  it, 
and  how  to  so  manage  it  as  to  acquire  profit.  In  our  study 
of  real  estate  as  a  business  we  shall  consider  it  under  three  gen- 
eral heads: 


6     REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

1.  Subject  matter. — Land,  interests  in  it,  liens,  taxes  and 

assessments. 

2.  Transfers. — Contract,  examination  of  title,  closing  of 

title  and  the  usual  instruments  used  in  connection 
therewith. 

3.  Management. — Relation     of     landlord     and     tenant, 

brokerage  and  valuations. 

The  laws  governing  real  estate  transactions,  while  there  are 
of  necessity  many,  are  neither  mysterious  nor  difficult  to  under- 
stand, and  any  man  should  be  able,  with  intelligent  effort,  to 
familiarize  himself  with  them  so  as  to  aid  him  materially  in 
whatever  business  he  may  be  engaged,  whether  he  confines 
himself  to  the  real  estate  business  or  not. 

Property. — In  its  legal  conception  property  is  the  right  to 
possess,  use  and  dispose  of  a  thing.  Technically  therefore 
property  is  not  the  thing  itself  but  the  right  to,  or  interest  in 
it.  Practically  however  the  thing  itself  is  also  termed  property. 

Realty  and  personalty. — Speaking  again  from  the  practi- 
cal viewpoint  property  is  of  three  kinds:  Realty,  personalty 
and  mixed.  Realty  may  be  defined  as  the  land  and  buildings 
thereon  and  anything  permanently  affixed  to  the  land  or  the 
building.  Personalty  on  the  other  hand  is  anything  which  does 
not  fit  within  the  definition  of  realty.  For  example,  a  watch, 
chairs,  rugs  and  cultivated  flower  plants  are  personalty,  while 
trees,  buildings,  furnace  and  plumbing  as  well  as  the  land  to 
which  they  are  affixed  are  usually  realty.  Mixed  property  is 
of  little  importance,  being  such  as  may  be  alternately  or  inter- 
changeably realty  or  personalty,  e.g.,  a  key  in  the  door  is  an 
integral  part  of  the  building,  hence  realty;  that  same  key  found 
on  the  street  is  merely  personalty.  For  practical  purposes 
realty  is  often,  though  incorrectly,  termed  real  property  and 
personalty,  personal  property. 

Real  property  and  personal  property. — Considering  these 
terms  in  their  legal  aspect,  that  is  as  indicating  the  interest  in 
the  thing  rather  than  the  thing  itself,  we  find  that  there  may  be 
both  real  property  and  personal  property  in  realty.  From  a 
technical,  legal  viewpoint,  real  property  is  any  interest  in  realty 
which  is  measured  as  to  duration  by  a  life,  or  lives  or  longer. 
Any  other  interest  in  realty  is  personal  property.  The  actual 
length  of  time  is  no  criterion;  the  life  may  last  only  a  few 
months  or  years,  yet  one  who  is  entitled  to  use  and  enjoy  realty 
during  that  period  is  possessed  of  a  real  property  right  therein. 


INTRODUCTORY  7 

If  his  right  be  under  a  lease  for  99  years  (longer  than  the  nor- 
mal life)  his  interest,  not  being  measured  by  a  life  or  lives  is 
personal  property. 

Real  Estate. — For  all  commercial  purposes  the  term  real 
estate  has  two  distinct  meanings.  First  it  is  the  article  dealt 
in,  and  in  this  sense  it  includes  realty  and  all  interests  therein 
whether  they  are  legally  real  or  personal  property.  Second 
it  is  the  name  of  the  business  engaged  in  by  those  who  conduct 
commercial  transactions  in  real  estate. 

Fixtures. — As  stated  above,  realty  includes  not  only  land 
and  buildings  but  also  anything  permanently  fixed  to  the  land 
or  building.  Such  are  known  as  fixtures.  It  is  sometimes  a 
very  difficult  matter  to  decide  whether  an  article,  which  of  its 
nature  is  personalty,  has  been  so  affixed  to  the  land  or  build- 
ing as  to  change  its  nature  from  personalty  to  realty.  If  so 
affixed  as  to  become  a  fixture  it  is  governed  by  the  rules  applying 
to  realty  and  becomes  for  all  practical  purposes  land  just  as 
much  as  if  it  were  soil.  The  importance  of  the  question  is 
that  if  a  fixture,  the  article,  unless  specifically  excepted,  passes 
with  a  sale  or  conveyance  of  the  land  regardless  of  the  intention 
of  the  parties  to  the  transaction. 

The  following  criteria  usually  determine  the  effect  of  the  an- 
nexation. 

I.  The  reasonably  presumable  intent  of  the  person  placing 
the  article  as  indicating  whether  the  article  should  become  a 
fixture. 

II.  Method  of  annexation. — It  is  a  general  rule  that  if  the 
article  be  specially  adapted  for  use  where  placed,  and  to  remove 
it  would  leave  the  building  or  land  incomplete,  it  is  a  fixture. 

III.  Relation  of  the  parties. — The  most  important  of  these 
is  that  of  landlord  and  tenant.    Trade  fixtures  installed  by  the 
tenant  even  if  they  come  squarely  within  I.  and  II.  above,  do 
not  become  part  of  the  realty,  e.  g.,  shelving,  counters,  show- 
cases. 


CHAPTER  II 

INTERESTS  IN  REALTY 

Limitations  upon  ownership. — Two  principal  systems  of 
land  ownership  in  England,  were  Feudal  and  Alodial.  His- 
torically they  are  very  interesting  and  well  worth  fuller  exam- 
ination than  the  scope  of  this  book  permits.  The  Feudal  sys- 
tem conceived  the  absolute  ownership  of  all  land  to  be  in 
the  king  or  sovereign,  the  subject  having  merely  a  feud  or  right 
to  use  the  land  in  return  for  services.  The  Alodial  system  on 
the  other  hand  recognized  the  principle  that  land  might  be 
owned  by  an  individual,  subject  to  no  proprietary  control  of 
the  sovereign.  It  did  however  recognize  certain  political 
rather  than  proprietary  duties,  such  as  to  repair  bridges,  roads 
and  fortresses.  In  the  United  States  land  is  owned  on  princi- 
ples derived  from  the  Alodial  system.  We  recognize  private 
ownership,  yet  just  as  there  were  certain  duties  on  land  under 
the  Alodial  system,  so  there  are  limitations  upon  ownership 
and  use  inseparable  from  it,  which  for  the  mutual  welfare  of 
the  community  are  enforced  against  the  individual  owner, 
They  are 

1.  Police  power  of  the  State. 

2.  Escheat  to  the  State. 

3.  Eminent  domain. 

4.  Taxation. 

Police  power. — The  police  power  permits  the  municipality 
to  restrict  the  use  of  realty  so  as  to  protect  the  health  or  morals 
of  its  citizens.  Buildings  must  be  of  certain  type  depending  on 
use,  must  have  certain  safety  devices,  plumbing,  and  other  ar- 
rangements. The  regulations  of  the  much  maligned  but  very 
valuable  Tenement  House  Department,  the  Building,  Fire  and 
Health  Departments  of  the  City  of  New  York  are  exercises  of 
the  police  power,  as  a  limitation  upon  the  use  of  land. 

Escheat. — The  original  owner  of  all  land  was  the  State, 
from  whom  all  titles  are  traced  under  a  grant  and  subsequent 
conveyance.  It  would  be  impossible  to  conceive  of  land  be- 
coming unowned  i.e.,  owned  by  no  one,  hence  the  law  of 
escheat  under  which  if  an  owner  of  land  die  leaving  no  heirs 
and  not  disposing  of  the  land  by  will,  the  ownership  of  the 
land  goes  back  or  escheats  to  the  State.  This  however  is  very 
rare.  Sometimes  it  is  difficult  to  find  the  heirs,  but  there 


INTERESTS  IN  REALTY  9 

usually  are  heirs  to  be  found,  if  there  be  sufficient  diligence  in 
seeking  them. 

Eminent  domain. — The  right  of  eminent  domain  is  the 
power  inherent  in  the  State,  to  take  by  due  process  of  law  from 
an  owner,  his  land  when  necessity  arises.  Only  two  require- 
ments must  be  met;  the  use  must  be  public,  and  just  compensa- 
tion paid  to  the  owner.  Whether  or  not  he  wants  to  surrender 
his  land  makes  no  difference,  nor  can  he  set  his  own  price.  His 
desires  are  not  consulted  and  a  fair  valuation  fixed  by  expert 
appraisers  is  paid  him.  Land  is  obtained  for  streets,  parks  and 
public  buildings  by  means  of  the  exercise  of  this  power. 

Right  of  taxation. — Under  the  right  of  taxation,  the 
fourth  limitation,  the  State  levies  taxes  for  its  support,  and  the 
maintainance  of  all  its  varied  branches  which  protect  and  bene- 
fit the  citizens  of  the  State.  It  is  fair  that  they  should  pay  for 
the  protection  and  benefit  they  receive.  Land  by  reason  of  its 
permanence  and  accessibility  is  a  convenient  article  to  tax,  and 
is  usually  the  basis  for  taxation  and  such  taxes  when  levied,  if 
not  paid  in  due  course,  are  enforced  and  may  result  in  the  owner 
losing  his  land. 

Estates  and  chattel  interests. — Rights  in  realty  which  in 
the  legal  sense  amount  to  real  property  (extending  in  duration 
one  or  more  lives  or  in  perpetuity)  are  termed  "estates,"  while 
those  which  are  personal  property  are  known  as  chattel  inter- 
ests. There  may  be  both  estates  and  chattel  interests  in  the 
same  piece  of  realty  and  several  of  each.  The  principal 
chattel  interests  are  leaseholds  (Chap.  XI)  and  liens  (Chap. 
Ill) .  The  most  common  estates  are,  fee  simple,  fees  determin- 
able  and  conditional,  life  estates  and  remainders,  dower, 
curtesy,  tenancy  in  common,  joint  tenancy  and  tenancy  by  the 
entirety. 

Fee  simple.— Fee,  fee  simple,  and  fee  simple  absolute,  all 
having  the  same  meaning,  may  be  defined  as  the  largest  possible 
estate  in  real  property.  The  owner  of  this  estate  may  use  it 
and  dispose  of  it  during  his  lifetime  or  by  his  will  as  he  de- 
sires, or  if  he  do  not  make  any  such  disposition,  the  real  prop- 
erty automatically  passes  at  his  death  to  his  heirs  without  any 
future  limitation,  other  than  the  four  limitations  mentioned 
above,  which  it  must  be  remembered  affect  all  real  property. 
The  instrument  creating  the  estate  contains  usually  the  words 
"to  A  and  his  heirs  and  assigns  forever."  Most  realty  is  held 
in  fee  simple,  and  the  term  "Ownership"  ordinarily  indicates 


10   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

such  a  right.  A  fee  simple  is  therefore  the  subject  of  the  usual 
commercial  transaction  in  the  sale  of  realty.  All  other  estates 
in  real  property  are  less  than  and  some  part  of  the  fee  simple. 
When  gathered  together  they  make  a  complete  fee.  This 
"splitting  up"  of  the  fee  simple  is  usually  as  to  quantity  or  time. 

Fee  upon  condition  and  fee  determinable. — In  both 
these  estates  the  holder  has  a  fee  simple  except  that  there  is  a 
limitation  which  may  take  his  rights  from  him  and  give  them 
to  another.  Both  give  the  holder  all  the  benefits  of  full  fee 
ownership  subject  to  the  happening  of  a  future  contingency, 
which  if  it  occurs  ends  his  rights.  In  a  fee  upon  condition  the 
contingency  may  never  arise,  while  in  a  fee  determinable,  it 
must  arise,  if  at  .all,  within  a  certain  or  determinable  time.  For 
example :  A  piece  of  land  is  given  to  be  used  as  a  church,  the 
gift  providing  that  if  used  for  any  other  purpose  the  land  shall 
revert  to  the  giver  or  his  heirs.  In  this  case  the  fee  of  the  land 
is  in  the  church  organization  and  may  remain  in  it  forever  but 
will  cease  when  the  land  ceases  to  be  used  for  a  church,  in  which 
event  the  fee  would  revert  to  A  if  living,  or  his  heirs.  The 
fee  is  upon  condition.  If  land  is  given  to  A  and  his  heirs  with 
a  provision  that  if  A  die  leaving  no  children  then  the  land  shall 
go  to  B,  A  has  a  fee  determinable.  A  has  the  full  benefit  as 
long  as  he  lives.  Within  a  certain  time,  that  is,  at  A's  death, 
the  contingency  must  occur  if  at  all.  Either  A  leaves  children 
or  not.  In  either  event  the  limitation  on  the  fee  L  then  deter- 
minable. 

Life  estates  and  remainders. — These  are  very  common 
and  a  simple  example  of  "fee  splitting."  A  man  gives  land 
to  A  for  his  life  and  at  A's  death  it  is  to  go  to  B.  A,  who  is 
known  as  the  life  tenant,  takes  a  life  estate,  that  is  the  full 
right  in  the  property  for  life,  and  B  takes  a  remainder — the 
right  to  receive  and  use  the  property  at  A's  death.  When  A 
dies  the  fee  is  reunited  in  B  who  is  then  the  owner  of  a  fee 
simple  in  the  land.  The  life  interest  may  be  measured  by  the 
life  tenant's  own  life  or  by  that  of  any  other  person.  The  re- 
mainder may  be  so  created  that  the  remainderman  cannot  be 
known  until  the  termination  of  the  life  estate.  If  it  can  be  de- 
termined the  remainder  is  vested,  if  not,  contingent.  For  ex- 
ample: Gift  to  A  for  life  remainder  to  B.  B  has  a  remainder 
and  since  his  right  to  succeed  is  fixed,  his  possession  merely 
being  suspended  till  A's  death,  he  has  a  vested  remainder.  But 
suppose  the  gift  were  to  A  and  his  children  after  death,  but 


INTERESTS  IN  REALTY  11 

provided  that  if  he  left  no  children  then  B  should  take.  In 
this  case  B  has  a  remainder,  however,  whether  or  not  he  will 
ever  be  entitled  to  possession,  and  enjoyment  of  the  land  cannot 
be  ascertained  till  the  time  of  A's  death;  and  he  will  take  no 
rights  if  A  leaves  children.  Consequently  B's  remainder  is 
contingent. 

Dower. — Dower  is  the  estate  for  life  which  is  given  by  law 
to  a  wife  upon  her  husband's  death,  in  all  real  property  owned 
by  him  at  any  time  during  marriage.  The  requisites  for  the 
establishment  of  the  estate  are : 

1.  A  valid  marriage. 

2.  Ownership  in  husband. 

3.  Death  of  husband. 

The  interest  of  the  wife  attaches  to  the  real  property  even 
during  her  husband's  lifetime  and  cannot  be  cut  off  without 
her  consent.  This  consent,  when  given,  is  usually  by  a  deed 
from  the  wife,  or  by  her  joining  in  the  deed  with  her  husband, 
when  he  sells  the  real  property.  It  must  not  be  forgotten, 
however,  that  the  husband  having  once  owned  real  property 
during  the  marriage,  no  act  of  his  can  dispose  of  his  wife's  right 
of  dower.  His  deed  or  will  attempting  to  do  so  is  entirely  inef- 
fectual. All  that  he  could  give  would  be  his  own  interest  in  the 
property,  his  wife's  dower  right  still  attaching.  She  cannot 
release  her  dower  right  to  her  husband  except  by  agreement  be- 
fore marriage.  If  she  desires  to  relinquish  her  claim  she  can 
do  so  only  to  the  person  who  has  purchased  the  property. 
Should  the  wife  predecease  her  husband,  of  course  her  interest 
ceases.  Upon  her  husband's  death,  the  dower  estate  of  the 
surviving  wife  becomes  fixed,  and  in  New  York  and  most  other 
States  entitles  the  wife  to  one-third  of  the  income  from  the 
real  property  as  long  as  she  lives.  Usually  the  wife's  dower 
right  is  satisfied  by  paying  her  a  lump  sum,  arrived  at  by  multi- 
plying one-third  of  the  net  rent  for  one  year  by  the  number 
of  years  the  insurance  tables  indicate  the  wife  will  live,  after 
her  husband's  death. 

Curtesy. — Tenancy  by  the  curtesy  is  the  life  estate  which 
is  given  by  law  to  the  husband  in  real  property  owned  by  his 
wife.  It  is  established  by 

1.  A  valid  marriage  and  birth  of  a  child. 

2.  Ownership  in  the  wife  at  her  death. 
J.  Death  of  the  wife. 

4.  No  disposition  by  wife's  will. 


12    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

It  will  be  seen  at  once  that  this  estate  is  very  different  from 
dower.  Curtesy  may  be  defeated  by  the  wife,  by  deed  at  any 
time  during  her  life,  or  if  she  disposes  of  the  real  property  by 
will.  Consequently  the  husband's  interest,  unlike  dower,  is 
of  no  practical  effect  until  the  death  of  the  wife  and  even  then 
her  will  may  cut  off  his  right.  If  all  the  conditions  exist  how- 
ever, then  the  husband  becomes  entitled  to  the  total  income 
from  the  property  as  long  as  he  live. 

Joint  interests  in  land. — Land  may  be  owned  by  two  or 
more  persons,  it  need  not  be  entirely  in  the  ownership  of  one 
person.  These  joint  interests  are  often  found  and  the  most 
usual  are  the  following: 

Tenancy  in  common. — This  is  the  ownership  of  land  by 
two  or  more  persons,  each  of  whom  has  an  undivided  interest 
which  upon  the  death  of  one  passes  to  the  heirs  or  under  the 
will  of  the  one  dying.  Unless  the  instrument  creating  the 
joint  interest  specifies  to  the  contrary,  this  interest  is  the  one 
established.  Any  person  owning  such  an  interest  may  convey 
his  joint  interest. 

Joint  tenancy. — A  joint  tenancy  is  similar  to  the  tenancy 
in  common  except  that  upon  the  death  of  one  his  interest 
passes  to  the  other — as  the  law  terms  it — by  survivorship. 
To  create  this  interest  the  instrument  must  specifically  so  state ; 
as  by  the  words  "A  to  B  as  joint  tenants"  or  "to  A  and  B 
and  their  survivor."  Either  may  convey  his  interest  and  in 
that  event  a  tenancy  in  common  arises. 

Estate  by  the  entirety. — A  deed  of  real  property  to  a  hus- 
band and  wife  as  such  gives  them  a  joint  interest  known  as  an 
estate  by  the  entirety.  They  each,  under  the  law,  own  the 
entire  property.  Neither  one  can  sell  his  or  her  interest  and 
the  survivor  upon  the  death  of  either,  becomes  entitled  to  all 
the  property. 

Title  to  real  property. — While  not  strictly  in  accord  with 
legal  theory,  for  practical  considerations,  title  to  real  property 
passes  usually  in  one  of  four  ways. 

1.  By  descent. 

2.  By  will. 

3.  By  voluntary  alienation. 

4.  By  involuntary  alienation. 

Title  by  descent. — The  right  of  a  person's  heirs  to  succeed 
to  his  title  upon  his  death  if  he  has  failed  to  dispose  of  his  real 
property  by  will  is  known  as  title  by  descent.  Heirs  are  spe- 


INTERESTS  IN  REALTY  13 

cifically  designated  by  law  as  to  their  order  of  succession.  In 
general  children  are  first  entitled  to  succeed  and  in  their  ab- 
sence parents  and  brothers  and  sisters. 

Title  by  will. — Usually  a  person  owning  real  property  en- 
deavors to  dispose  of  it  by  provision  in  his  will.  Such  dispo- 
sition is  known  as  a  "devise"  and  the  taker  is  termed  the  "de- 
visee." Subject  to  certain  legal  restrictions  a  devise  may  be 
made  to  anyone. 

Title  by  voluntary  alienation. — This  is  the  term  applied 
to  all  sales  and  gifts  made  during  his  lifetime  by  the  owner 
of  real  property.  Its  necessary  element  is  that  the  seller  act 
of  his  own  free  will  without  legal  compulsion.  It  includes  the 
usual  commercial  transactions  by  which  ownership  of  land  is 
transferred. 

Title  by  involuntary  alienation — All  transfers  of  title 
brought  about  without  the  owner's  consent  may  be  placed  in 
this  class,  such  as :  legal  sales  following  foreclosure  or  enforce- 
ment of  a  lien,  adverse  possession,  escheat  to  the  State. 


CHAPTER  III 

LIENS 

Liens. — In  addition  to  the  estates  and  chattel  interests  al- 
ready mentioned,  there  are  various  rights,  known  as  liens, 
which  affect  the  possession  and  ownership  of  realty.  A  lien 
is  the  right  given  by  law  to  a  creditor  to  have  a  debt  or  charge 
satisfied  out  of  the  property  belonging  to  his  debtor.  Liens 
are  of  importance  as  the  holder  (lienor)  may  be  entitled  to 
have  the  realty  sold  whether  or  not  the  owner  desires  it.  A 
lien  necessarily  arises  from  the  relation  of  debtor  and  creditor 
and  although  the  creation  of  that  relation  may  have  been  vol- 
untary, the  lien  once  coming  into  existence,  its  enforcement  is 
wholly  free  from  any  question  of  the  owner's  volition.  Liens 
are  of  two  kinds :  general  and  specific.  A  general  lien  affects 
all  the  property  of  the  debtor,  a  specific  lien  only  a  certain 
piece  or  pieces.  The  most  important  specific  liens  are: 

1.  Mortgages. 

2.  Taxes  and  Assessments. 

3.  Mechanic's  Liens. 

The  common  general  liens  are : 

1.  Judgments. 

2.  Decedent's  Debts. 

3.  Transfer  Tax. 

4.  Corporation  Franchise  Tax. 

Lien  of  mortgage. — A  borrower  of  money,  or  one  owing  a 
debt  may,  for  the  purpose  of  securing  payment  of  the  amount 
due  the  lender  or  creditor,  execute  an  instrument  known  as  a 
mortgage.  This  instrument  purports  to  transfer  to  the  cred- 
itor the  title  to  specific  real  property.  As  the  transfer,  from 
the  point  of  view  of  the  law  in  New  York  and  many  other 
States,  is  merely  conditional,  becoming  null  and  void  upon  pay- 
ment of  the  debt,  the  mortgage  does  no  more  than  create  a 
specific  lien  on  the  property.  Because  of  the  importance  of 
mortgages  in  the  real  estate  business  a  separate  chapter  has 
been  devoted  to  them. 

Taxes  and  assessments. — Taxes  and  assessments  levied  ac- 
cording to  law  become  a  specific  lien  on  the  real  property  af- 

14 


LIENS  \s 

fected  thereby.  If  the  charges  are  not  paid  the  taxing  body 
may  take  such  action  to  enforce  them  as  will  result  in  the  sale 
of  the  property.  A  fuller  description  of  liens  of  this  character 
will  be  found  in  another  chapter. 

Mechanic's  liens. — A  mechanic's  lien  is  a  lien  given  by 
statute  to  those  who  perform  labor  or  furnish  material  in 
the  improvement  of  real  property.  The  law  recognizes  the 
right  of  the  material  man  and  laborer  to  hold  for  the  amount 
of  their  claim  the  property  to  which  they  have  added  value 
and  this  right  is  in  addition  to  the  right  of  action  against 
the  person  who  made  the  contract  of  employment  or  purchase. 
The  lien  is  specific  as  it  affects  only  the  property  benefited, 
and  it  is  governed  by  the  provisions  of  the  statute  under  which 
the  right  is  obtained.  A  mechanic's  lien  is  usually  asserted 
by  filing  a  notice  of  the  claim  with  the  county  clerk.  (Ap- 
pendix form  1.)  This  notice  must  be  under  oath  of  the 
lienor  or  his  agent  and  must  set  forth  the  claim  in  detail  as  to 
date,  amount,  location  of  property,  etc.,  and  must  be  filed 
within  a  certain  time  after  the  last  material  was  furnished  or 
the  last  labor  performed.  It  then  continues  usually  for  a 
period  of  one  year  when  it  expires  unless  renewed  for  a  fur- 
ther period  by  court  order.  The  filing  of  the  lien  gives  notice 
of  it  to  all  dealing  with  the  property,  and  it  is  good  against  all 
except  those  whose  rights  are  prior  as  shown  by  the  public 
records.  The  lien  is  not  affected  by  unrecorded  instruments 
and  would  take  precedence  over  a  deed  or  mortgage  given 
prior  to,  but  not  recorded  until  after  the  filing  of  the  lien. 

The  right  to  file  a  mechanic's  lien  is  given  not  only  to  the 
contractor  dealing  directly  with  the  owner  of  the  property, 
but  is  also  given  to  sub-contractors.  In  Massachusetts,  Penn- 
sylvania, and  some  other  States,  the  owner's  property  can  be 
held  for  materials  and  labor  supplied  by  a  sub-contractor  in 
accordance  with  the  provisions  of  the  original  contract.  This 
imposes  upon  the  owner  the  obligation  of  seeing  that  the  sub- 
contractors are  being  paid  by  the  general  contractor  in  order 
to  avoid  liens  upon  his  property  and  additional  costs  for  the 
work  performed.  In  most  States,  including  New  York,  the 
law  is  that  the  sub-contractor  is  entitled  to  a  lien  on  the  prop- 
erty by  virtue  of  his  subrogation  to  the  rights  of  the  contrac- 
tor-in-chief.  Sub-contractors  under  this  rule  can  hold  the 
owner's  property  only  for  the  amount  due  under  the  main  con- 
tract— the  one  to  which  the  owner  is  a  party.  If,  however, 


16    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

the  main  contract  calls  for  installment  payments — that  is, 
paymei  ts  at  certain  periods  or  at  certain  stages  of  the  work — 
and  the  owner  anticipates  these  payments,  he  may  be  held  by 
sub-contractors  for  the  amount  so  anticipated.  They  can  rely 
on  his  making  payments  only  according  to  schedule  and  he 
deviates  therefrom  at  his  peril.  Owners  may  also  be  held  for 
payment  of  work  done  on  their  property  with  their  consent 
and  approval,  either  expressed  or  implied,  even  though  the 
contract  for  the  work  was  made  by  some  other  person,  such 
as  a  tenant.  The  owner  is  not  liable,  however,  for  work  done 
by  a  tenant  without  his  knowledge  or  consent,  nor  is  a  re- 
mainderman usually  liable  for  work  done  by  a  life  tenant,  and 
in  such  cases  liens  cannot  be  enforced  against  the  owner's  or 
remainderman's  property. 

Enforcement  of  mechanic's  lien. — A  mechanic's  lien  is  en- 
forced by  foreclosure.  The  foreclosure  is  a  legal  action 
against  the  owner  and  those  whose  claims  against  the  prop- 
erty are  inferior  to  the  lienor's.  A  judgment  of  the  court  in 
favor  of  the  lienor  orders  the  sale  of  the  property  by  an  officer 
of  the  court,  the  payment  into  court  of  the  moneys  realized 
at  such  sale,  a  marshalling  of  those  claims  against  the  prop- 
erty which  have  been  affected  by  the  foreclosure,  and  a  pay- 
ment of  the  claims  in  their  proper  order.  The  law  provides 
that  if  there  are  at  the  time  of  the  action  a  number  of  mech- 
anics' liens  against  the  property,  all  must  be  brought  into 
the  action  so  that  one  action  at  law  disposes  of  them  all. 

The  right  to  file  a  lien  is  an  important  one  to  mechanics  and 
material  men.  They  can  ascertain  the  ownership  of  the  prop- 
erty from  the  public  records,  and  also  find  the  amount  of  mort- 
gages or  other  liens  against  it.  This  information  assists  them 
in  determining  whether  or  not  to  extend  credit  to  the  owner 
of  the  property.  With  due  care  losses  through  bad  debts  can 
be  reduced  to  a  minimum.  Other  States  than  New  York  have 
laws  which  give  greater  effect  to  mechanic's  liens.  Objection 
may  be  made  to  some  of  them  on  the  ground  that  they  tend 
to  discourage  building  operations  especially  those  of  a  specu- 
lative kind.  New  buildings  are  often  financed  by  means  of 
building  loan  mortgages.  It  is  reasonable  to  assume  that 
mortgagees  will  not  be  attracted  to  the  building  loan  market 
should  they  find  that  the  law  protects  the  mechanic's  lienor 
to  the  mortgagee's  detriment. 

The  filing  of  mechanic's  liens  against  a  building  in  course 


LIENS  17 

of  construction  is  usually  an  indication  of  the  inability  of  the 
owner  to  meet  his  obligations.  The  important  thing  for  all 
persons  interested  in  the  operation  is  to  get  the  building  fin- 
ished. It  is  then  capable  of  producing  an  income  and  is  more 
readily  saleable.  Building  loan  mortgages  are  advanced  from-, 
time  to  time  during  construction  and  in  some  States  (New  York,  ! 
for  example)  advances  made  by  a  mortgagee  before  mechanic's 
liens  are  filed  are  prior  in  lien  to  the  claims  of  those  who  per-"" 
formed  the  work  and  furnished  material.  Cessation  of  work 
on  the  building  often  results  in  a  foreclosure  of  the  building 
loan  mortgage  and  a  consequent  loss  to  the  contractors.  To 
remedy  this  situation  the  New  York  law  provides  that  with 
the  approval  of  the  mechanic's  lienors  holding  seventy-five  per 
cent  of  the  amount  due,  a  trust  mortgage  may  be  made  for 
the  benefit  of  creditors  and  additional  money  borrowed  on  a 
mortgage  for  the  purpose  of  bringing  the  building  to  comple- 
tion. All  the  liens  take  equal  rank  and  become  subordinate 
to  such  a  mortgage.  The  assumption  is  that  on  completion 
the  building  will  be  worth  enough  to  repay  ( 1 )  the  money  bor- 
rowed before  the  liens  were  filed,  (2)  the  additional  amount 
borrowed  to  complete  the  building,  and  (3)  the  amount  of 
the  trust  mortgage  given  to  secure  the  amounts  due  the  lienors. 
Anything  the  building  may  bring  on  a  sale  in  excess  of  the  first 
and  second  items  will  go  to  pay  item  number  three  and  will  be  so 
much  the  creditors  will  get  that  they  would  not  have  received 
had  the  original  mortgage  been  foreclosed  on  an  uncompleted 
building. 

The  law  further  provides  that  lienors  of  a  piece  of  prop- 
erty to  the  extent  of  seventy-five  per  cent  of  the  aggregate 
amount  of  the  liens  may  consent  to  a  sale  of  the  property  upon 
condition  that  a  specified  sum  be  deposited  with  the  county 
clerk.  The  property  is  then  freed  from  the  liens  and  the 
lienors  have  recourse  to  the  sum  of  money  so  deposited.  This 
is  a  practical  provision  of  the  law  designed  to  permit  the 
sale  of  the  property  by  negotiation  and  agreement  (even 
though  it  bring  less  than  the  total  liens)  rather  than  at  a 
forced  sale  resulting  from  a  foreclosure. 

Discharge  of  mechanic's  lien.— A  mechanic's  lien  may  be 
discharged  or  become  non-effective  as  follows: 

(a)  By  expiration.  This  occurs  one  year  after  filing, 
unless  an  action  to  foreclose  it  or  an  action  to  foreclose  a  mort- 
gage on  the  property  has  been  begun  within  that  period. 


18    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

(b)  By  payment,  and  by  a  certificate  or  satisfaction  piece 
executed  and  acknowledged  by  the  lienor,   and  duly  filed  in 
the  county  clerk's  office. 

(c)  By  order  of  the  court  vacating  or  cancelling  the 
lien  for  neglect  to  prosecute  it.    This  may  be  obtained  by  serv- 
ice of  notice  by  the  owner  on  the  lienor  requiring  the  lienor 
to  commence  an  action  to  foreclose  the  lien  within  a  specified 
time,  not  less  than  thirty  days.     The  claim  of  the  lienor  may 
be  disputed  by  the  owner  and  he  may  take  this  course  in  order 
that  the  claim  may  be  tried  in  court,  or  the  lien  cancelled.     If 
the  court  order  is  obtained  the  record  of  the  lien  will  be  marked 
"Discharged  by  Order  of  the  Court." 

(d)  By  filing  of  a  bond  approved  by  the  court.     The 
bond  may  be  that  of  two  or  more  personal  sureties  or  of  a 
surety  company.     The  record  of  the  lien  is  marked  "Dis- 
charged by  Bond,"  the  property  is  freed  from  the  lien  and 
the  lienor  has  recourse  to  the  bond. 

(e)  By  deposit  of  money  into  court.     Before  an  action 
is  commenced  on  a  lien  the  amount  claimed  with  interest  to 
date  of  deposit  may  be  deposited  with  the  county  clerk.  After 
an  action  has  been  commenced  the  amount  deposited  shall 
be  such  a  sum  as  in  the  judgment  of  the  court  will  cover  the 
amount  of  any  judgment  that  may  be  recovered  in  the  action. 
The  lien  is  marked  "Discharged  by  payment." 

Judgments. — A  judgment  is  the  determination  of  the  rights 
of  parties  through  an  action  at  law.  All  judgments  are  not 
money  judgments,  and  only  those  which  give  a  money  award 
are  here  considered.  Judgments  for  the  payment  of  money, 
when  docketed,  become  a  general  lien  on  all  property  of  the 
debtor.  The  judgment  docket  is  the  book  or  register  kept 
by  the  county  clerk  in  which  is  entered  a  record  of  all  judg- 
ments of  which  the  clerk  has  been  furnished  a  transcript.  The 
docket  is  arranged  alphabetically  according  to  debtors.  When 
a  search  is  made  for  liens  against  a  piece  of  property  it  is  im- 
portant to  examine  the  judgment  docket  to  see  if  there  are  any 
judgments  against  those  who  now  own,  or  have  for  a  certain  time 
prior  owned,  the  property. 

A  judgment  is  enforced  by  execution  and  by  the  sale  of  any 
property  of  the  debtor  that  may  be  found.  Execution  is  a 
writ  directed  to  the  sheriff,  the  executive  officer  of  the  court, 
This  writ  authorizes  him  to  seize  the  debtor's  property  and 
to  sell  so  much  of  it  as  may  be  required  to  pay  the  judgment 


LIENS  19 

plus  incidental  expenses.  The  property  may  be  real  or  per- 
sonal. If  there  is  real  property  apparently  owned  by  the 
debtor,  the  sheriff,  after  legal  advertising,  offers  to  the  highest 
bidder  all  of  the  debtor's  right,  title  and  interest  of,  in  and  to 
the  property.  This  interest  may  be  substantial  or  it  may  be 
nominal  or  even  nothing  at  all.  The  buyer  at  such  a  sale 
ascertains  this  at  his  own  risk  before  making  a  bid.  What  is 
of  interest  to  us  in  this  discussion  is  the  fact  that  the  judg- 
ment is  a  lien  on  the  debtor's  real  property  and  such  property 
may  be  sold  against  his  will  by  an  officer  of  the  court. 

Discharge  of  judgment. — A  judgment  is  a  lien  on  property 
from  the  time  of  being  docketed  until  a  specific  time,  usually 
about  ten  years,  after  its  date  when  the  lien  expires.  Under 
certain  circumstances  the  lien  may  be  renewed,  but  we  seldom 
find  this  done.  If  the  debtor  pays  a  judgment  he  is  entitled 
to  a  formal  receipt  called  a  satisfaction  piece.  This  satisfac- 
tion piece  is  filed  with  the  county  clerk  who,  upon  its  receipt, 
marks  "satisfied"  against  the  record  of  the  judgment  on  the 
docket.  Many  judgments,  after  being  obtained  in  a  lower 
court,  are  reversed  on  appeal  to  a  higher  court.  Pending 
the  appeal  the  debtor  may  file  a  bond,  approved  by  the  court, 
in  order  to  free  his  property  from  the  lien  of  the  judgment. 
The  judgment  in  such  a  case  is  marked  "Suspended  on  Ap- 
peal." 

Attachments. — Another  form  of  lien  on  real  property  is 
the  attachment  which  is  a  statutory  privilege  given  to  a.  plain- 
tiff or  complainant  in  the  courts  in  an  action  for  money  dam- 
ages before  any  judgment  is  procured.  In  some  States  every 
plaintiff  in  every  action  may  file  an  -attachment  against  the 
defendant's  property.  Most  States,  however,  give  the  plain- 
tiff this  privilege  only  for  specific  causes;  generally  for  the 
non-residence  of  the  defendant  or  his  removal,  or  threatened 
removal,  of  property  from  the  State  or  for  his  obtaining 
credit  on  the  basis  of  a  false  financial  statement  made  in 
writing.  By  filing  an  attachment  the  plaintiff  in  the  action 
practically  insures  himself  that  there  will  be  some  property 
out  of  which  the  judgment  could  be  paid  if  the  action  is  suc- 
cessful. 

In  order  to  protect  the  defendant,  the  plaintiff  obtaining 
the  writ  of  attachment  must  file  a  bond  in  writing  that  if  the 
defendant  wins,  the  plaintiff  will  pay  all  costs  and  damages 
which  the  defendant  may  suffer  because  of  the  attachment. 


20    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

An  attachment  is  filed  in  practically  the  same  way  as  a 
judgment  lien,  and  has  substantially  the  same  right  of  prior- 
ity as  the  judgment.  It  lasts  until  the  action  has  been 
disposed  of.  If  the  plaintiff  wins  the  lien  of  attachment  is 
discharged.  If  the  defendant  against  whom  the  attachment  lien 
has  been  filed  wishes  to  sell  his  property  during  the  pendancy 
of  the  action  he  may  file  a  bond  equal  in  amount  to  the  plain- 
tiff's demand,  plus  costs.  The  county  clerk  would  then  mark 
the  attachment  lien  "Discharged  by  Bond." 

Lien  of  decedent's  debts. — The  real  property  of  a  dece- 
dent passes  at  his  death  to  his  devisees  if  he  leaves  a  will,  and 
to  his  heirs  at  law  if  he  die  intestate.  Title  to  the  property 
vests  in  the  devisees  or  heirs  subject  to  such  liens  as  existed 
at  the  time  of  decedent's  death.  The  property  is  also  subject 
to  the  lien  of  all  just  debts  against  the  estate.  The  debts  are 
paid,  however,  out  of  the  personal  property  in  the  estate 
using  first  that  not  specifically  bequeathed,  then  that  disposed 
of  by  legacies.  If  all  the  personal  property  has  been  used 
up  and  unpaid  debts  remain,  the  decedent's  real  property  may 
be  sold  to  pay  them.  It  is  important,  in  taking  title  to  prop- 
erty from  an  estate,  or  recently  owned  by  a  deceased  person, 
and  in  making  loans  on  such  property,  to  obtain  satisfactory 
proof  of  the  payment  of  all  debts  of  the  decedent. 

Transfer  tax. — The  collateral  inheritance  tax,  or  transfer 
tax,  as  it  is  often  called,  is  a  tax  levied  by  the  State  upon  the 
right  to  inherit  from,  or  take  under  the  will  of  a  deceased  per- 
son. It  is  not  a  tax  upon  the  estate  but  on  the  recipients. 
However,  the  amount  of  the  tax  is,  by  law,  made  a  lien  upon 
the  property  of  the  estate,  and  until  paid  the  realty  is  subject 
to  it  as  an  encumbrance,  and  clear  title  cannot  be  given.  If 
the  tax  is  not  paid  in  due  time,  after  the  death  of  the  de- 
ceased, the  State  may  enforce  its  lien,  which  is  a  general  lien, 
by  selling  sufficient  of  any  of  the  assets  of  the  estate  to  pay 
the  tax.  The  amount  of  tax  is  found  as  follows :  The  value 
of  the  interest  passing  to  each  beneficiary  is  appraised.  The 
tax  is  computed  by  taking  a  certain  percentage  of  the  ap- 
praised value.  The  rate  per  cent  varies;  immediate  kin  be- 
ing taxed  at  a  lower  rate  than  distant  relatives,  and  distant 
relatives  than  non-relatives.  Relatives  are  also  allowed  cer- 
tain exemptions  which  are  deducted  from  the  value  of  their 
interests  before  computation  of  the  tax. 

Federal  estate  tax. — This  tax  differs  essentially  from  the 


LIENS  21 

transfer  tax  in  that  it  is  levied  not  upon  the  amounts  passing 
to  the  beneficiaries,  but  upon  the  total  estate.  Under  the  law 
as  it  exists  at  the  time  of  writing  an  exemption  of  $50,000  is 
allowed  and  no  report  need  be  filed  unless  the  gross  estate  is 
at  least  $50,000.  The  tax  is  computed  on  a  percentage,  which 
increases  with  the  size  of  the  estate,  i.e.,  1%  on  first  $50,000 
-2%  on  next  $100,000— 3%  on  next  $100,000  etc.  The 
amount  of  this  tax  is  a  lien  upon  the  entire  estate,  and  payment 
may  be  enforced  by  sale  of  any  portion. 

Corporation  franchise  tax. — In  most  States  corporations 
are  taxed  annually  on  their  franchise,  or  right  to  do  business 
in  the  State.  There  are  various  methods  of  computing  the 
amount  of  the  tax.  It  is  usually  based  on  the  amount  of  either 
capital  or  capital  stock  or  net  income  of  the  corporation.  The 
tax  is  a  general  lien  on  the  property  of  the  corporation  and 
can  be  enforced  against  it. 

Conditional  bill  of  sale. — There  are  certain  encumbrances 
against  real  property  which  are  not  true  liens.  One  of  these 
is  the  conditional  bill  of  sale.  This  is  an  agreement  for  the 
sale  of  articles  of  personal  property  which  are  to  be  used  in 
the  improvement  of  real  property  under  the  terms  of  which 
title  to  the  articles  sold  does  not  pass  until  the  purchase  price 
has  been  paid.  The  law  in  New  York  requires  that  the  agree- 
ment must  be  filed  in  the  office  of  the  county  recording  officer 
at  or  before  the  delivery  of  the  goods  to  the  premises.  If 
so  filed,  it  is  valid  against  the  claims  of  other  parties  having 
interest  in  the  realty,  even  though  the  articles  may  be  affixed 
to  the  realty.  Articles  which  are  frequently  the  subject  of 
these  agreements  are  gas  and  coal  ranges,  boilers,  elevators, 
lighting  fixtures,  etc.  The  agreement  remains  as  effective  notice 
usually  for  one  year  only  unless  refiled. 

Other  encumbrances,  not  true  Hens.— Other  encumbrances 
against  real  property,  which,  although  not  liens  must  be  con- 
sidered, include  easements,  covenants  and  restrictions,  govern- 
mental regulations  and  proceedings  for  their  enforcement.  ^ 

Easements  are  rights  of  others  to  have  certain  uses  of  one's 
property.  Examples  of  such  are  rights  to  maintain  a  party 
wall,  right  of  way  for  ingress  and  egress  over  another]s  land, 
right  to  maintain  windows  for  light  and  air,  and  right  of 
drainage  across  another's  property. 

Covenants  and  restrictions  arise  through  agreements  con- 
tained in  deeds  or  are  created  by  specific  agreements  between 


22    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

interested  parties.  Their  effect  is  to  limit  the  use  of  the  prop- 
erty and  to  provide  that  certain  things  may  or  may  not  be 
done  with  it.  Restrictions  may  specify  the  character  and  loca- 
tion of  the  building  to  be  erected  on  the  land  and  the  uses 
to  which  any  such  building  may  be  put.  They  are  imposed  or 
created  to  protect  the  property  or  neighboring  property. 

Governmental  regulations  include  such  things  as  the  zoning 
resolutions  adopted  by  a  municipality.  Under  such  a  resolu- 
tion, the  city  is  zoned  and  the  use,  height,  and  area  of  build- 
ings thereafter  erected  is  regulated.  The  building  depart- 
ment, tenement  house  department,  and  other  governmental 
authorities  regulate  the  use  and  occupancy  of  buildings.  While 
orders  issued  by  these  departments  are  not  liens,  they  should 
be  considered  in  dealing  with  real  property.  Disobedience 
to  the  orders  may  result  in  an  action  at  law  against  the  prop- 
erty, including  a  notice  of  pendency  of  action  filed  in  the  county 
clerk's  office  and  the  possibility  of  a  penalty  being  imposed. 

Priority  of  liens. — The  usual  rule  as  to  priority  of  liens 
is  that  they  rank  in  the  order  of  their  filing  or  recording  in 
the  office  of  the  proper  officials.  A  mortgage  recorded  yes- 
terday has  precedence  over  one  recorded  today,  and  both 
are  prior  in  lien  to  a  mechanic's  lien  that  may  be  filed  tomor- 
row. As  to  judgments,  there  is  an  exception  to  this  rule;  a 
judgment  is  not  good  against  the  rights  of  those  claiming  under 
a  deed  or  mortgage  actually  delivered  prior  to  the  date  of 
docket  of  the  judgment,  even  though  the  deed  or  mortgage 
has  not  been  recorded.  The  reason  for  this  is  that  the  record- 
ing laws  protect  innocent  purchasers  and  mortgages  for  value 
and  such  it  may  be  presumed  are  those  who  hold  the  deeds 
and  mortgages.  They  parted  with  value  when  the  deed  or 
mortgage  was  delivered  to  them  and  they  relied  upon  the  rec- 
ord title  in  doing  so.  The  creditor  who  secures  a  judgment 
does  so  regardless  of  what  a  debtor  may  or  may  not  own — 
he  asserts  an  existing  claim  in  an  action  at  law  and  when  he 
secures  his  judgment  it  becomes  a  lien  on  what  the  debtor 
actually  owns  at  that  time.  It  must  of  course  be  recognized 
that  deeds  and  mortgages  given  to  defraud  creditors  may  be 
set  aside,  and  that  reference  is  here  made  only  to  those  given 
in  good  faith  for  value.  It  must  also  be  noted  that  the  lien 
of  all  taxes  and  assessments  imposed  by  any  governmental 
authority  is  superior  to  every  other  lien  regardless  of  the 
date  of  the  lien  or  its  recording.  Of  course,  the  relative  rank 


LIENS  23 

of  any  two  or  more  liens  can  be  changed  by  agreement  be- 
tween the  holders  of  them  and  this  is  often  done  with  respect 
to  mortgages  by  means  of  an  instrument  known  as  a  subor- 
dination agreement. 
(Appendix  form  49.) 


CHAPTER  IV 

TAXES,  ASSESSMENTS  AND  WATER  RATES 

Lien  of  taxes. — The  ownership  of  property  in  a  civilized 
community  is  subject  to  the  right  of  the  State  to  levy  taxes 
upon  it  for  the  purpose  of  obtaining  funds  to  defray  the  ex- 
pense of  government.  As  the  expense  is  recurring  the  tax 
levy  is  made  at  regular  periods.  It  is  apportioned  on  the  basis 
of  the  valuations  of  the  property  taxed  and  it  is  made  a  lien 
on  it  which  may  be  enforced  by  the  sale  of  the  property  or 
some  interest  in  it. 

Taxes  may  be  levied  upon  both  real  and  personal  property. 
There  are  of  course  other  forms  of  taxation,  such  as  the  In- 
come Tax,  which  are  not  direct  levies  upon  property  of  any 
kind. 

Various  tax  levies. — In  large  cities  there  is  usually  one 
annual  tax  levy  which  provides  funds  for  all  purposes  for  which 
the  city  raises  money.  In  other  localities  there  are  various 
tax  levies  and  these  may  be  all  or  some  of  the  following: 

(a)  State  tax. — The  expenses  of  the  State  government  are 
met  to  a  large  extent  by  special  taxes  such  as  income  taxes,  in- 
heritance  taxes,    corporation   taxes,    stock   transfer   tax,    and 
automobile  tax.     If  these  taxes  do  not  provide  the  State  with 
sufficient  funds,  a  direct  tax  is  levied  by  counties  based  upon 
the  value  of  the  taxable  property  in  each  county. 

(b)  County  tax. — Each  county  of  the  State  raises  money  by 
taxation  for  the  expenses  of  the  county  government,  and  its 
courts,  penal  institutions,  hospitals,  care  of  the  poor,  roads, 
and  bridges. 

(c)  Town  tax. — Local  town  government  provides  for  its 
needs  by  taxation.     Frequently  State,  county  and  town  taxes 
are  levied  and  collected  at  the  same  time. 

(d)  School  tax. — The  school  tax  is  often  a  separate  levy 
by  school  districts  for  the  purpose  of  maintaining  the  public 
schools.     The   appropriation   for  which  the  tax  is  levied  is 
usually  voted  by  the  tax-paying  residents  of  the  district. 

(e)  Highway  tax. — The  highway  tax  is  usually  made  by 
highway   commissioners    for   the   upkeep   and    repair   of   the 
roads  within  the  district. 

24 


TAXES,  ASSESSMENTS  AND  WATER  RATES  25 

(f)  City  or  'village  ta*.— Incorporated  cities  and  villages 
within  a  county  provide  for  their  recurring  expenses  by  a 
separate  and  independent  tax  levy. 

Determination  o*  .mount  of  tax. — In  order  to  ascertain 
the  amount  of  tax  against  a  particular  piece  of  property  a  tax 
rate  must  be  determined.  To  arrive  at  the  tax  rate,  two 
factors  are  used — the  budget  or  amount  j)f  money  to  be 
raised,  and  the  total  valuation  of  taxable  property  within  the 
district.  The  total  amount  to  be  raised  by  taxation  divided 
by  the  total  assessed  valuation  gives  the  rate.  The  rate  ap- 
plied to  the  value  of  a  particular  parcel  of  real  estate  gives 
the  amount  of  taxes  chargeable  to  it.  For  example,  assume 
the  budget  to  be  $200,000,000,  the  assessed  value  of  the 
property  $8,000,000,000,  and  the  amount  derived  from  rev- 
enues other  than  taxes  for  real  estate  $50,000,000;  the  tax 
rate  would  be  determined  by  deducting  $50,000,000  from 
$200,000,000,  which  would  leave  $150,000,000,  which  di- 
vided by  $8,000,000,000  gives  .01875,  or  $1.875  per  $100 
assessed  valuation. 

The  Budget. — A  budget  is  "a  statement  of  probable  revenue 
and  expenditure  and  of  financial  proposals  for  the  ensuing 
year  as  presented  to  or  passed  upon  by  a  legislative  body." 
It  is  customary,  in  the  preparation  of  a  budget  for  each  branch 
or  department  of  the  Government  to  prepare  in  detail  an 
estimate  of  the  amount  it  requires  for  the  period  under  con- 
sideration. This  estimate,  with  those  of  other  departments, 
are  analyzed  and  amended,  usually  decreased,  by  the  legisla- 
tive body.  After  consideration  of  all  estimates,  the  final 
figures  are  assembled  and  the  total  of  them  represents  the 
amount  of  money  the  political  body  appropriates  for  its  use 
for  the  period.  There  usually  are  revenues  derived  from 
sources  other  than  taxation  and  these,  estimated  as  closely  as 
possible,  are  deducted  from  total  of  the  budget.  The  re- 
maining amount  represents  the  sum  which  must  be  raised  by 
taxation  on  property  within  the  jurisdiction.  In  some  States 
there  is  a  tax  on  personal  property.  In  others,  since  the 
enactment  of  income  tax  laws  so  much  personal  property  is 
exempt  that  the  direct  tax  falls  almost  entirely  upon  real 
property. 

Assessed  valuations. — Since  the  tax  is  apportioned  to 
various  properties  in  proportion  to  the  value  of  each,  it  is 
necessary  for  the  taxing  body  acting  by  its  representatives  to 


26   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

examine  and  equitably  appraise  all  taxable  property.  Vari- 
ous methods  of  appraisement  are  used,  some  of  which  take 
the  property  at  a  fraction  of  real  market  value,  such  as  one- 
half,  two-thirds,  or  three-fourths.  Others  figure  the  value  to 
be  the  amount  for  which  the  property  would  sell  at  a  forced 
sale,  and  again  others  use  as  a  basis  the  full  market  value  of 
the  property.  Many  large  cities  use  the  last  method  and  this 
is  generally  coming  to  be  recognized  as  the  only  one  which 
is  fair  and  equitable.  Full  market  value  has  been  defined  as 
the  price  which  one  who  wishes  to  buy,  but  is  not  compelled  to 
buy,  would  pay  to  a  seller  willing  but  not  compelled  to  sell. 
Prices  paid  at  auction  sales,  particularly  forced  sales,  do  not 
usually  measure  true  market  value,  and  neither  do  prices  paid 
for  property  by  those  who  have  a  need  for  that  particular 
property  only. 

The  assessor,  in  valuing  property,  frequently  separates  the 
values  of  land  and  buildings.  The  land  is  valued  on  the  basis 
of  the  value  of  a  standard  or  typical  lot.  That  is,  a  lot  of  the 
unit  of  size  usually  marketed  in  the  vicinity.  If  the  assessor 
fairly  determines  the  value  of  such  a  lot,  he  allocates  to  all 
similar  lots  the  same  value.  It  will  of  course  be  seen  that 
in  the  valuation  of  lots  in  cities  and  villages  each  street  and, 
in  fact,  each  block  must  be  considered  separately.  Main 
thoroughfares  and  business  streets  create  values  in  excess  of 
those  on  side  streets  and  in  residential  districts.  Corners, 
corner  influences,  plottage  and  similar  circumstances  are  taken 
into  account  in  order  that  the  assessor  may  make  an  equitable 
appraisement,  one  that  is  fair  and  just  both  to  the  tax  payer 
and  the  community.  In  certain  cities  maps  are  published  by 
the  tax  departments  giving  the  front  foot  value  of  land  in  each 
block  of  the  entire  city. 

The  standard  lot  is  usually  considered  to  be  one  hundred 
feet  in  depth.  Lots  of  varying  depths  are  appraised  by  rules 
which  have  been  devised  for  the  purpose.  New  York  City 
assessors  use  the  Hoffman-Neil  rule  which  calculates  the  pro- 
portion of  value  of  each  foot  in  depth  from  one  foot  to  one 
hundred  feet. 

While  all  lots  in  a  block  may  have  the  same  value,  the 
buildings  may  be  different  both  as  to  size  and  character.  In 
the  valuation  of  buildings  the  tax  assessor  must  consider 
whether  they  are  new  or  old  and  whether  they  are  or  are  not 
the  proper  improvement  for  the  land.  New  buildings  are 


TAXES,  ASSESSMENTS  AND  WATER  RATES  27 

usually  worth  their  cost  of  production  and  the  assessment  is 
computed  on  that  basis.  As  the  age  of  a  building  increases, 
allowance  is  made  for  depreciation.  When  the  land  value 
remains  stationary  and  the  building  depreciates  through  age 
the  total  valuation  of  land  and  building  will  therefore  tend 
to  decrease  year  by  year.  In  many  localities,  land  increases 
in  value  as  time  goes  on,  due  to  its  availability  for  a  better 
building;  that  is  to  say,  one  producing  a  greater  rental.  The 
assessed  valuation  of  the  lot  improved  with  an  old  building 
will  increase  but  the  total  of  land  and  building  will  remain 
the  same.  In  such  cases  the  building  is  assessed,  not  at  its 
cost  less  depreciation,  but  at  the  amount  it  adds  to  the  value 
of  the  land.  This  condition  may  progress  so  that  a  once  valu- 
able building  adds  to  the  land  merely  a  nominal  amount. 

Assessors  should  always  consider  the  rent  a  building  is 
capable  of  producing.  It  has  been  stated  as  a  principal  that  an 
improved  parcel  of  real  estate  is  never  worth  more  than  its 
capitalized  rental  value  unless  the  land  alone  exceeds  in  value 
this  capitalized  sum. 

The  cost  of  a  building  of  a  certain  type  can  be  determined 
to  a  fair  degree  of  accuracy  by  means  of  certain  factors  de- 
rived from  experience  in  actual  building  costs.  These  may  be 
the  cost  per  foot  of  the  cubical  contents  of  the  building  or  the 
cost  per  square  foot  of  floor  surface.  The  type  of  building 
is  first  considered, — loft,  factory,  non-fireproof  walk-up  apart- 
ment, elevator  apartment,  office  building,  etc.  Then  its  size 
is  ascertained.  The  proper  unit  is  applied  and  the  result  is  the 
estimated  cost  of  the  building.  The  units  of  cost  are  subject 
to  revision  and  change  from  time  to  time  to  meet  varying 
conditions. 

Reduction  of  assessed  valuation. — The  value  assigned  to 
a  piece  of  property  by  a  tax  official  is  merely  the  opinion  of 
that  official  as  to  its  value.  The  owner  of  the  property  may 
not  agree  with  such  opinion  and  may  feel  that  his  property  has 
been  assessed  too  high.  It  is  his  privilege  to  object  to  the 
assessment  and  he  is  entitled  to  a  hearing  on  his  objections. 
In  making  a  protest  of  this  kind  it  is  advisable  to  analyze  the 
assessment  as  to  land  and  building  and  see  which  is  erroneous. 
If  it  is  claimed  that  the  land  is  assessed  too  high,  it  must  be 
for  one  of  two  reasons.  Either  a  mistake  has  been  made  (in 
which  case  a  correction  is  easily  obtained),  or  the  wrong  unit 
of  value  has  been  applied.  A  change  in  the  latter  requires 


28    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

more  care  as  it  means  that  a  reduction  in  the  unit  of  value  will 
affect  the  assessment  on  neighboring  property  also.  It  is 
usually  the  case  that  a  reduction  in  the  assessed  valuation  of 
one  lot  results  in  reducing  the  value  of  adjoining  lots  also,  and 
often  all  the  lots  in  an  entire  block.  Evidence  of  value  may 
be  offered  by  a  tax  payer  by  way  of  information  as  to  sales, 
mortgages,  etc.,  and  his  contention  may  be  supported  by  such 
evidence. 

If  the  tax  payer's  protest  is  based  upon  a  claim  of  over- 
assessment  of  the  building,  he  has  a  fair  chance  to  obtain  a 
reduction.  Every  building  is  considered  separately  so  that  a 
reduction  of  assessed  value  of  one  does  not  necessarily  mean 
that  others  must  be  reduced  also.  In  making  a  claim  of  this 
kind  the  owner  may  offer  as  evidence  proof  of  the  cost  of  the 
building,  its  rental,  physical  condition,  sales  price,  mortgages, 
etc.,  etc. 

Certiorari. — The  action  of  the  tax  officials  is  subject  to 
review  by  the  court.  If  an  owner  feels  aggrieved  by  an  assess- 
ment upon  his  property  and  is  unable  to  secure  a  reduction 
upon  protest  to  the  officials,  he  can  appeal  to  the  courts.  This 
is  a  proceeding  a  certiorari,  that  is  to  say,  it  is  upon  a  proceed- 
ing whereby  the  tax  officials  are  required  to  produce  their  rec- 
ords and  to  certify  to  them  to  the  court  in  order  that  the 
court  may  determine  whether  they  have  proceeded  according 
to  the  principals  of  law  by  which  they  are  bound.  The  court 
does  not  fix  the  assessment  but  it  may  criticise  the  administra- 
tive officers  and  give  directions  as  to  how  they  must  proceed.  It 
is,  of  course,  also  possible  that  the  court  will  sustain  the  tax 
officials  and  find  that  they  have  proceeded  according  to  law 
in  fixing  the  assessment. 

Taxes  in  New  York  City. — The  practise  followed  in  the 
levying  of  taxes  is  illustrated  by  the  methods  employed  in 
New  York  City.  There  you  will  find  a  Board  of  Tax  Com- 
missioners consisting  of  a  President  and  six  Commissioners. 
Each  borough  of  the  City  is  divided  into  sections  and  a  Deputy 
Tax  Commissioner  is  assigned  to  each  section.  These  Depu- 
ties commence  to  examine  and  appraise  the  property  in  their 
respective  districts  on  April  first  of  each  year.  Their  reports 
are  completed  and  tabulated  by  October  first,  and  on  that 
date  the  records  are  open  for  public  inspection.  From  Octo- 
ber first  to  November  fifteenth  owners  may  file  notices  of 
protest  of  any  assessment.  On  November  sixteenth  the  books 


TAXES,  ASSESSMENTS  AND  WATER  RATES  29 

are  closed  and  the  commissioners  hear  and  consider  protests 
made  by  owners.  On  February  first  the  assessment  rolls  are 
made  up  and  on  March  first  they  are  delivered  to  the  Board 
of  Aldermen.  On  March  third  the  Aldermen  fix  the  tax 
rate  (by  dividing  the  total  amount  to  be  raised  by  the  total 
of  all  assessed  valuations),  and  on  March  twenty-eighth  the 
rolls  are  delivered  to  the  Receiver  of  Taxes.  The  Receiver 
of  Taxes  computes  the  amount  of  tax  for  each  parcel  of  real 
estate  by  applying  the  rate  against  the  assessed  valuation  of 
the  parcel.  One-half  of  the  tax  becomes  due  and  payable  and 
a  lien  on  the  property  on  May  first,  and  the  balance  on  Nov- 
ember first.  The  first  half  is  payable  during  the  month  of 
May  and  the  second  half  in  November,  and  if  not  so  paid 
interest  at  seven  per  centum  per  annum  from  the  due  date  is 
added. 

The  budget  for  the  City  is  made  up  from  estimates  sub- 
mitted to  the  Board  of  Estimate  and  Apportionment  by  the 
various  City  departments.  Hearings  are  held  and  investiga- 
tions conducted,  after  which  a  tentative  budget  is  prepared 
and  approved.  It  is  then  referred  to  the  Board  of  Alder- 
men. This  Board  may  reduce  or  strike  out  appropriations 
made  but  cannot  make  additions  to  the  budget.  The  Mayor 
also  passes  on  it  and  may  veto  the  reductions  and  eliminations 
made  by  the  Aldermen.  The  budget  finally  adopted  for  the 
ensuing  year  must  be  certified  by  December  twenty-fifth  and 
must  be  published  in  the  City  Record  before  December 
thirty-first. 

There  is  a  slight  difference  in  the  tax  rates  for  the  five 
boroughs  due  to  the  fact  that  each  pays  the  expense  of  its 
own  county  government. 

The  entire  assessment  roll  of  the  City  is  published  as  sup- 
plements to  the  City  Record.  The  City  also  publishes  outline 
maps  showing  each  block  and  the  boundaries  of  the  sections, 
and  a  land  value  map  book  showing  units  of  land  value  on 
each  block. 

Taxes  are  assessed  against  the  property  by  section,  block 
and  lot.  By  such  method  all  outstanding  liens  for  taxes  (and 
also  assessments  for  local  improvements  and  water  rates) 
can  be  readily  ascertained.  The  system  has  many  advan- 
tages over  that  of  levying  the  assessment  against  the  prop- 
erty by  names  of  owners.  Under  the  latter  system  search 


30    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 


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TAXES,  ASSESSMENTS  AND  WATER  RATES  31 


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34   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

must  be  made  against  the  names  of  the  owners  for  some  time 
past  in  order  to  ascertain  the  existence  of  arrears. 

It  has  been  noted  that  taxes  in  New  York  City  by  law  be- 
come liens  on  the  property  on  May  1st  and  November  1st  in 
each  year.  As  between  buyer  and  seller  the  one  owning  the 
property  on  the  day  the  tax  becomes  a  lien  usually  pays  it. 
It  is  the  rule  in  many  other  places  that  the  tax  is  a  charge  as 
soon  as  definitely  determined,  even  though  not  due  until  a 
later  date.  The  budget,  assessed  values,  and  tax  rates  for 
New  York  City  for  the  year  1921  are  shown  by  the  tables  on 
pages  30  to  33  inclusive. 

ASSESSMENTS 

Definition  of  assessments. — Assessments  are  charges  upon 
real  property  benefited  by  a  local  improvement  to  pay  all  or 
part  of  the  cost  of  such  improvement.  They  do  not  recur 
regularly  as  taxes  do,  and  they  are  not  apportioned  according 
to  the  value  of  the  property  affected.  For  example,  all  lots 
fronting  on  a  certain  street  are  benefitted  by  the  paving  of 
the  street  and  are  equally  assessed  for  it,  even  though  the 
corner  lots  may  have  a  greater  value  than  inside  lots.  Build- 
ings are  not  considered  in  apportioning  the  assessment,  it 
being  assumed  that  the  land  receives  all  the  benefit.  Some- 
times assessments  are  spread  over  a  large  area,  ^he  property 
nearest  to  the  improvement  being  charged  with  a  greater  pro- 
portion of  it  than  property  more  remote,  the  rate  decreasing 
with  the  distance  from  the  improvement. 

How  assessments  are  levied. — Assessments  must  be  levied 
according  to  law  and  therefore  due  notice  must  be  given  to 
the  property  owners  in  order  that  the  proceedings  be  valid 
and  the  resulting  charge  on  the  property  be  an  enforceable 
lien.  The  notice  is  usually  given  by  advertisement. 

There  are  two  methods  of  procedure  for  laying  assessments 
for  local  improvements,  one  a  proceeding  by  authority  of  the 
courts,  and  the  other  an  action  taken  by  a  board  of  assessors. 

Assessments  laid  by  authority  of  the  courts. — The  pro- 
ceeding under  which  land  is  taken  for  public  purposes  is  called 
a  condemnation  proceeding.  The  property  is  said  to  be  "con- 
demned" and  the  proceeding  is  for  the  purpose  of  obtaining 
title  to  it  and  determining  the  amount  to  be  paid  the  owners 
for  the  land  taken.  When  the  appropriation  of  the  land  for 


TAXES,  ASSESSMENTS  AND  WATER  RATES  35 

a  public  purpose  benefits  other  land,  part  or  all  of  the  cost  of 
the  proceeding  (including  the  damages  paid  to  the  owners  of 
the  land  taken)  is  assessed  upon  the  land  benefitted.  The 
various  parcels  of  land  taken  are  called  "damage  parcels"  and 
the  various  parcels  upon  which  the  assessment  is  laid  are 
called  "benefit  parcels." 

The  proceedings  may  be  in  court  or  before  commissioners 
appointed  by  the  court.  An  opportunity  to  be  heard  is  given 
to  all  owners  whose  property  is  affected.  If  the  hearings  are 
before  commissioners,  they  must  present  a  report  for  confir- 
mation and  the  property  owner  may  file  objections  to  it,  and 
the  courts  will  determine  the  merits  of  any  such  objections. 
Upon  completion  of  the  proceedings  the  awards  and  assess- 
ments are  fixed.  The  assessments  are  thereafter  entered  in 
an  assessment  book  and  become  liens  on  the  property  affected, 
that  is  to  say  the  "benefit  parcels"  of  the  condemnation  pro- 
ceedings. 

Examples  of  condemnation  proceedings  under  which  asess- 
ments  are  levied  are  those  for  opening  and  widening  streets, 
and  for  acquiring  land  for  public  parks  and  playgrounds. 

Assessments  laid  by  board  of  assessors. — Many  local  im- 
provements are  made  by  public  officials,  acting  on  the  initia- 
tive of  the  property  owners  or  their  representatives.  Such 
improvements  include  sewers,  sidewalks,  grading,  curbing, 
and  paving  streets.  Notice  of  intention  to  do  the  work  is 
given,  and  notice  of  the  assessment  levied  to  pay  the  cost  is 
also  given.  Property  owners  may  object  to  the  assessment 
upon  their  property  and  may  carry  their  objections  to  the 

courts. 

Assessors  are  often  limited  as  to  the  amount  of  any  assess- 
ment they  may  lay  to  a  fixed  percentage  of  the  value  of  the 
property  assessed.  This  rule  acts  as  a  safeguard  to  the  owner 
and  may  prevent  actual  confiscation  of  the  property.  It  may 
however,  in  some  cases,  retard  the  improvement  of  suburban 
districts  by  preventing  the  performance  of  necessary  work. 

When  assessments  become  liens.— Assessments  become 
liens  when  they  are  definitely  known  and  fixed.  In  some  cities 
by  statute  they  become  liens  ten  or  more  days  after  being  con- 
firmed and  entered.  By  provision  of  law  in  some  States  an 
assessment  of  large  amount  (usually  three  to  five  per  cent  or 
more  of  the  assessed  value  of  the  property)  may  be  divided 
into  installments  payable  over  a  period  of  five  to  ten  years  or 


36    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

more.  Interest  is  charged  on  the  deferred  installments  at  five 
to  seven  per  cent  per  annum  and  on  due  and  unpaid  assess- 
ments the  interest  ratio  is  increased. 

Water  rates. — Water  is  a  commodity  sometimes  furnished 
by  a  private  company  and  sometimes  furnished  by  the  munici- 
pality. When  furnished  by  the  municipality  the  charge  for  it 
is  enforced  in  a  manner  similar  to  the  charge  for  taxes,  that 
is  to  say,  the  charge  becomes  a  lien  on  the  property.  There 
are  two  methods  of  making  the  charges,  one  a  flat  rate  per 
annum  based  on  the  size  of  the  building  to  which  the  water  is 
furnished,  and  taking  into  consideration  the  outlets  for  water 
supply  in  the  building.  The  second  method  of  making  charges 
is  by  the  installation  of  a  water  meter  which  measures  the  actual 
amount  of  water  consumed,  the  charge  being  fixed  at  so  much 
per  cubic  foot.  The  charge  for  water  at  the  flat  rate  usually 
becomes  due  and  payable  and  a  lien  on  the  property  on  January 
first  or  some  other  fixed  day  in  each  year,  and  penalties  are 
added  if  the  charges  are  not  paid  within  a  certain  time. 
Charges  for  water  on  meter  become  due  as  the  meters  are 
read  and  the  charges  entered  on  the  books  of  the  Water  De- 
partment. 

Enforcement  of  lien  of  taxes. — There  are  several  methods 
of  enforcing  the  payment  of  taxes.  The  property  may  be 
sold  at  public  auction.  At  such  auction  sale  the  property  is 
struck  down  to  the  highest  bidder.  The  sale,  however,  is  sub- 
ject to  the  right  of  the  former  owner  to  redeem  the  property 
from  the  sale  by  paying  the  amount  of  taxes,  penalties,  and 
interest  within  a  certain  time.  Sometimes  the  sale  takes  the 
form  of  a  lease  of  the  property  for  a  period  of  years.  In  the 
City  of  New  York  at  present  the  law  permits  the  City  to  sell 
a  lien  on  the  property  after  taxes,  assessments  or  water  rates 
have  remained  unpaid  for  a  certain  time.  A  list  of  all  prop- 
erties upon  which  there  are  arrears  of  taxes,  assessments  or 
water  rates  is  made  up  and  the  date  of  sale  advertised,  and  at 
such  sale  the  purchaser  acquires  not  the  property  itself  but  a 
lien  upon  it.  The  bidding  at  the  sale  is  by  rates  of  interest, 
the  person  bidding  the  lowest  rate  of  interest  (which  must 
not  be  more  than  twelve  per  cent)  becomes  the  owner  of  the 
lien.  He  then  has  what  is  practically  the  same  as  a  first  mort- 
gage on  the  property  and  which  has  three  years  to  run  and 
bears  interest  at  the  rate  he  bid  at  the  sale.  The  interest  is 
payable  semi-annually.  If  there  is  a  default  in  the  payment 


TAXES,  ASSESSMENTS  AND  WATER  RATES   37 

of  interest,  or  in  the  payment  of  subsequent  taxes  or  assess- 
ments on  the  property  or  if  the  principal  is  not  paid  at  matur- 
ity the  lien  may  be  foreclosed  by  an  action  similar  to  an  action 
for  the  foreclosure  of  a  mortgage.  By  this  method  of  en- 
forcing the  payment  of  taxes,  assessments  and  water  rates  the 
City  has  been  successful  in  obtaining  the  payment  of  the  ar- 
rears. The  only  disadvantage  that  may  be  noticed  about  this 
method  of  enforcing  payment  of  taxes  is  the  fact  that  it  has 
allowed  certain  people  to  purchase  the  tax  liens,  not  for  the 
purpose  of  making  an  investment  at  a  fair  rate  of  interest, 
but  rather  for  the  purpose  of  making  a  profit  through  charges 
for  legal  services  in  connection  with  the  foreclosure  of  the 
liens.  In  an  action  to  foreclose  the  lien  the  owner  and  all 
persons  interested  are  made  parties  to  the  action,  and  must 
be  served.  This  gives  the  owners  notice  and  an  opportunity  to 
pay  the  liens,  penalties,  legal  charges,  and  interest,  and  thus 
avoid  actual  sale  of  the  property. 


CHAPTER  V 

CONTRACTS 

Importance. — Sales,  purchases  and  exchanges  of  realty  are 
continually  being  made  and  engage  the  attention  of  owners, 
purchasers  and  brokers.  These  transactions  usually  are  volun- 
tarily entered  upon  and  almost  without  exception  are  initiated 
by  a  contract  embodying  the  terms  of  agreement.  Consequently 
a  thorough  working  knowledge  of  the  contract,  its  purpose  and 
effect,  is  essential  to  the  owner  who  is  about  to  sell,  the  pro- 
posed purchaser  and  the  broker  who  is  presumed  to  be  protect- 
ing the  interests  of  one  or  both  parties  to  the  transaction. 

Definition. — A  contract  for  the  sale  or  exchange  of  real 
estate  must  contain  the  attributes  of  any  legal  contract.  Le- 
gally defined,  a  contract  is  a  deliberate  engagement  between 
competent  parties,  upon  legal  consideration,  to  do  or  abstain 
from  doing  some  legal  act.  An  examination  of  the  foregoing 
definition  reveals  four  elements  necessary  for  any  contract: 

1.  Competent  parties. 

2.  Offer  and  acceptance. 

3.  Consideration. 

4.  Legality  of  object. 

Contracts  involving  real  property  have  one  additional  requi- 
site: 

5.  Must  be  in  writing  and  signed. 

Competent  parties. — Naturally  there  must  be  at  least  two 
parties  to  a  contract;  a  man  could  not  make  an  enforceable 
contract  with  himself.  The  parties  must  meet  on  the  same 
mental  plane;  an  idiot,  or  insane  person  cannot  make  a  bind- 
ing contract,  he  not  knowing  the  nature  of  his  act  or  what  he 
signs.  A  delusion  upon  one  subject  may,  however,  not  in- 
capacitate him,  as  he  may  be  thoroughly  intelligent  as  to  other 
things.  They  must  meet  on  the  same  legal  plane;  an  infant 
cannot  be  bound  by  his  contract.  He  may  sell  his  realty,  re- 
ceive and  spend  the  price  paid  him,  then  disaffirm  his  contract 
and  a  court  will  restore  to  him  his  property. 

The  question  of  competency,  from  a  practical  viewpoint, 
concerns  more  particularly  the  legal  capacity  to  sell  of  execu- 
tors, trustees  and  persons  acting  under  a  power  of  attorney. 

38 


CONTRACTS  39 

They  have  only  such  rights  and  privileges  as  may  be  given 
them  by  the  instrument  appointing  them.  Care  should  be 
taken  to  have  them  produce  and  to  examine  such  instrument 
before  entering  upon  a  contract  with  them.  It  may  be  they  are 
restricted  as  to  price,  terms,  time  within  which  to  act,  or  in 
some  other  way,  which  would  prevent  their  consummation  of 
the  contract. 

A  corporation  which  is  about  to  sell  real  estate  authorizes 
its  president  or  other  officer  by  by-law  or  resolution  to  execute 
the  contract.  Customarily  the  purchaser  docs  not  insist  upon 
seeing  the  original  or  a  certified  copy  of  such  by-law  or  reso- 
lution but  assumes  the  fact  that  the  officer  has  authority  to  exe- 
cute the  contract  since  he  is  in  possession  of  the  corporate  seal 
which  he  impresses  upon  the  contract.  There  is  no  reason, 
however,  why  inquiry  concerning  the  officer's  authority  should 
not  be  made,  particularly  if  the  purchaser  is  paying  a  consider- 
able deposit  on  the  signing  of  the  contract.  Where  the  sellers 
are  co-owners  (joint  tenants,  tenants  in  common,  or  co-part- 
ners) it  is  advisable  that  the  purchaser  insist  upon  all  the 
owners  signing  the  contract. 

Offer  and  acceptance. — The  contract  must  create  future 
obligations.  "A"  gives  a  deed  of  his  house  to  "B."  There 
is  no  contract;  the  transaction  is  complete.  The  theory  and 
intent  of  a  contract  is  to  create  a  binding  obligation  upon  each 
of  the  parties  to  do  or  abstain  from  doing  something  in  the 
future.  If  the  thing  is  done,  it  would  be  nonsense  to  attempt 
to  contract  with  reference  to  it.  Naturally,  also,  the  offer 
and  acceptance  must  relate  to  a  specific  thing,  known  to  both 
parties.  No  contract  is  created  if  each  has  a  different  thing 
in  mind.  There  is  no  meeting  of  the  minds  under  such  circum- 
stances. A  mutual  mistake  will  avoid  the  agreement. 

Consideration. — The  promise  of  the  one  party  to  the  con- 
tract must  be  supported  by  an  undertaking  of  the  other.  Each 
must  obligate  himself.  Each  must  put  some  consideration 
into  the  agreement.  A  mere  promise  would  not  be  binding 
upon  its  maker.  A,  seeing  his  good  friend  B,  says  to  him, 
"B,  I  will  give  you  my  house  to-morrow."  B  cannot  enforce 
the  delivery  of  the  house.  But  if  A  had  made  offer  to  give  B 
the  house  if  B  would  cease  the  use  of  tobacco  for  one  week,  then 
there  is  a  mutual  obligation  or  consideration  and  B,  having 
performed  his  promise,  can  enforce  delivery  of  the  house  to 
him.  In  real  estate  contracts  the  usual  situation  is  that  the 


40   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

seller  promises  to  sell  and  convey  realty  and  the  purchaser 
accepts  the  offer  and  creates  the  mutual  obligation  by  agreeing 
to  pay  a  certain  price  for  the  realty.  A  more  extended  discus- 
sion of  the  various  kinds  and  adequacy  of  consideration  will 
be  found  in  the  chapter  on  deeds. 

Legality  of  object. — An  agreement  to  be  an  enforceable 
contract  must  contemplate  the  attainment  of  an  object  not  ex- 
pressly forbidden  by  law  nor  contrary  to  public  policy.  For 
example :  An  agreement  for  the  sale  of  realty  to  be  used  ex- 
pressly for  the  sale  of  alcoholic  beverages  is  unenforceable  as 
its  object  is  contrary  to  law.  So  also  an  agreement  by  which 
A,  a  confirmed  woman  hater,  promises  B  a  house  for  B's  prom- 
ise never  to  marry,  is  against  public  policy,  as  discouraging 
marriage,  and  therefore  unenforceable. 

Necessity  of  writing. — The  contract  for  the  sale  of  real 
property  is  expressly  required  by  law  to  be  in  writing  and 
signed  by  the  party  to  be  bound  by  it.  This  is  the  old  "Statute 
of  Frauds"  in  its  present  form,  and  is  intended  to  prevent 
fraudulent  proof  of  a  fictitious  verbal  contract,  thereby  depriv- 
ing the  owner  of  valuable  realty.  Practically,  for  commer- 
cial reasons  a  written  contract  is  a  necessity  in  a  real  estate 
transaction.  There  are  usually  many  terms  and  provisions 
agreed  upon  and  it  would  be  impracticable  to  attempt  to  carry 
them  all  in  one's  memory.  Even  aside  from  the  opportunity 
for  fraud,  natural  forgetfulness  would  give  rise  to  innumer- 
able disputes. 

The  writing  may  be  upon  any  lasting  substance,  made  with 
anything  from  stylus  to  paint  brush  and  in  any  language,  which 
can  be  translated  into  English.  Care  must  be  had,  however, 
to  see  that  all  the  provisions  are  embodied  in  the  contract,  for 
after  it  is  once  signed,  nothing  can  be  added  to  it  except  by 
consent  of  all  parties.  Anything  left  out  of  the  written  con- 
tract, even  though  agreed  upon  in  the  discussion  leading  to 
the  contract,  is  unenforceable.  Care  should  also  be  taken  to 
sec  that  the  various  provisions  state  explicitly  what  is  in- 
tended. No  explanation  can  later  be  given  to  change  the 
meaning  of  a  provision  which  on  its  face  appears  clear.  The 
words  as  put  into  the  instrument  may  mean  something  entirely 
different  from  what  was  intended,  yet,  if  the  error  does  not 
appear  from  reading  the  contract,  no  explanation  can  be  given. 

Form  of  contract. — The  following  is  the  form  of  con- 
tract of  sale  used  by  the  title  insurance  companies  of  New 


CONTRACTS  41 

York.  Other  forms  are  in  use  and  it  is  not  compulsory  to  use 
this  form.  However,  it  contains  in  its  printed  portion  Sub- 
stantially all  the  provisions  commonly  used;  the  blank  spaces 
to  be  filled  in  with  the  matter  peculiar  to  each  transaction. 

CONTRACT  OF  SALE 

AGREEMENT,  made  and  dated 
between 

hereinafter  described  as  the  seller,  and 

hereinafter  described  as  the  purchaser, 

Witnesseth,  that  the  seller  agrees  to  sell  and  convey,  and  the  purchaser  agrees 

to  purchase  all  that  lot  or  parcel  of  land,  with  the  buildings  and  improvements 

thereon,  situate,  lying  and  being  in  the  Borough  of 

County  of  City  and  State  of  New  York, 


The  price  is 

Dollars,  payable  as  follows: 

Dollars  on  the  signing  of  this  contract,  the  receipt  of  which  is  hereby  acknowl- 
edged. 

Dollars  in  cash  or  certified  check  on  the  delivery  of  the  deed  as  hereinafter 
provided. 

The  deed  shall  be  delivered  upon  the  receipt  of  said  payment  at  the  office  of 
at  o'clock  M.,  on  192 

Rents  and  interest  on  mortgages  and  insurance  premiums,  if  any,  are  to  be 
apportioned. 

The  seller  agrees  that  brought  about  this 

sale  and  agrees  to  pay  the  broker's  commission  therefor. 

If  there  be  a  water  meter  on  the  premises,  the  seller  shall  furnish  a  reading 
to  a  date  not  more  than  thirty  days  prior  to  date  herein  set  for  closing  title 
and  the  unfixed  meter  charge  for  the  intervening  time  shall  be  apportioned  on 
the  basis  of  such  last  meter  reading. 

This  sale  covers  all  right,  title  and  interest  of  the  seller,  of,  in  and  to  any 
land  lying  in  the  bed  of  any  street,  road  or  avenue,  opened  or  proposed,  in 
front  of  or  adjoining  said  premises,  to  the  centre  line  thereof,  or  all  right,  title 
and  interest  of  the  seller  in  and  to  any  award  made  or  to  be  made  in  lieu 
thereof,  and  the  seller  will  execute  and  deliver  to  the  purchaser  on  closing  of 
title,  or  thereafter  on  demand,  all  proper  instruments  for  the  conveyance  of  such 
title  and  the  assignment  and  collection  of  such  award. 

The  deed  shall  be  in  proper  statutory  form  for  record,  shall  contain  the 
usual  full  covenants  and  warranty,  and  shall  be  duly  executed  and  acknowl- 
edged by  the  seller,  at  the  seller's  expense,  and  in  form  for  recording,  so  as 
to  convey  to  the  purchaser  th«  fee  simple  of  the  said  premises,  free  of  all  incum- 
brances  except  as  herein  stated,  and  except  restrictions  imposed  by  the  City  of 
New  York  under  resolution  of  the  Board  of  Estimate  and  Apportionment, 
adopted  July  25,  1916,  and  acts  amendatory  and  supplemental  thereto. 


42    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

If  there  be  a  mortgage  on  the  premises  and  such  mortgage  has  been  reduced 
by  payments  on  account  of  the  principal  thereof,  then  the  seller  agrees  to 
deliver  to  the  purchaser  at  the  time  of  delivery  of  the  deed  a  proper  certificate 
executed  and  acknowledged  by  the  holder  of  such  mortgage  and  in  form  for 
recording,  certifying  as  to  the  amount  of  the  unpaid  principal  sum  of  such 
mortgage  and  rate  of  interest  thereon,  and  the  seller  shall  pay  the  fees  for 
recording  such  certificate. 

All  notes  or  notices  of  violation  of  law  or  municipal  ordinances,  orders,  or 
requirements  noted  in  or  issued  by  the  Tenement  House  or  Building  Depart- 
ment or  Health  Department  against  or  affecting  the  premises  at  the  date  hereof, 
shall  be  complied  with  by  the  seller  and  the  premises  shall  be  conveyed  free 
of  the  same.  The  seller  shall  furnish  the  purchaser  with  an  authorization  to 
make  the  necessary  searches  therefor. 

All  personal  property  appurtenant  to  or  used  in  the  operation  of  said  premises 
is  represented  to  be  owned  by  the  seller  and  is  included  in  this  sale. 

All  sums  paid  on  account  of  this  contract  and  the  reasonable  expense  of  the 
examination  of  the  title  to  said  premises  are  hereby  made  liens  thereon,  but 
such  liens  shall  not  continue  after  default  by  the  purchaser  under  this  contract. 

The  risk  of  loss  or  damage  to  said  premises  by  fire  until  the  delivery  of  the 
deed  is  assumed  by  the  seller. 

The  stipulations  herein  are  to  apply  to  and  bind  the  heirs,  executors,  admin- 
istrators, successors  and  assigns  of  the  respective  parties. 

Witness  the  signatures  and  seals  of  the  above  parties. 
In  Presence  of 

(L.  S.) 
(L.  S.) 
(L.  S.) 

Divisions  of  contract. — An  examination  of  the  form 
shows  that  the  contract  falls  into  five  general  divisions. 

1.  Statement  of  parties. 

2.  Description  of  property. 

3.  Financial  statement. 

4.  Closing  date  and  place. 

5.  Miscellaneous  provisions. 

While  it  is  not  necessary  to  use  the  form  set  forth,  nor  any 
other  particular  form,  the  contract  should  contain  at  least  the 
first  three  divisions.  If  no  closing  date  and  place  is  fixed,  a 
reasonable  time  is  presumed  to  be  intended,  sufficiently  in  the 
future  to  enable  the  seller  and  purchaser  to  prepare  to  com- 
plete the  transaction.  While  the  miscellaneous  provisions  are 
not  absolutely  vital,  their  absence  from  the  contract  may  give 
rise  to  dispute  and  inconvenience.  Experience  shows  the  ad- 
visability of  using  a  printed  form,  filling  in  the  blanks. 

The  contract  is  usually  prepared  in  duplicate  so  that  each 
party  may  retain  a  copy.  In  opening  the  first  words  are 

"Agreement,  made  and  dated  192.  .."  The 

word  "Agreement"  is  not  necessary.  If  the  writing  contain 
the  necessary  elements  it  is  a  contract  whether  so  labelled  or 


CONTRACTS  43 

not.  Nor  is  the  date  necesary.  Without  the  date,  it  would 
be  just  as  binding.  Dating  the  instrument  is  convenient  as  a 
memorandum  of  the  fact,  however,  and  is  usually  done. 

Statement  of  parties. — Following  the  date,  the  words 

"between hereinafter  described  as  the  seller, 

and hereinafter  described  as  the  purchaser," 

indicate  the  place  for  insertion  of  the  names  of  the  seller 
and  purchaser.  The  names  of  both  should  be  correctly  writ- 
ten and  for  convenience  should  be  followed  by  the  address 
of  each,  as  it  is  usually  necessary  to  have  the  addresses  of  each 
party  for  use  in  preparing  the  instruments  later  required  to 
consummate  the  contract. 

Each  of  the  parties  approach  the  bargain  from  a  different 
viewpoint.  The  seller  is  about  to  undertake  to  deliver  his 
realty  at  a  future  date  upon  payment  of  an  agreed  price.  Un- 
til the  closing  of  title  he  obligates  himself  not  to  seek  other 
sale,  although  he  has  only  a  small  part  of  the  price  in  the 
form  of  a  deposit.  The  purchaser  on  his  part  is  about  to  pay 
a  deposit  to  secure  the  property  and  will  incur  additional  ex- 
pense in  examination  of  title,  as  well  as  abandoning  further 
search  for  a  location.  Each  of  the  parties,  therefore,  is  in- 
terested in  the  financial  capacity  and  good  faith  of  the  other. 

The  seller  wishes  to  be  sure  his  purchaser  can  and  will  fulfill 
the  contract.  This  is  so  particularly  if  the  market  is  falling, 
for  if  the  purchaser  later  default,  the  seller  will  very  probably 
sustain  a  loss.  If  the  market  is  rising  the  danger  is  much  less, 
as,  in  case  of  the  purchaser's  later  failure  to  complete  the 
contract,  the  seller  has  an  opportunity  to  sell  at  a  greater 
price.  Of  course,  the  seller  may  protect  himself  to  some  ex- 
tent by  requiring  a  larger  deposit  when  he  has  any  doubt  as 
to  his  purchaser's  good  faith  or  knows  him  to  be  a  "dummy." 

The  purchaser  should  at  once  satisfy  himself  that  the  person 
recited  as  the  seller  owns  the  property.  He  should  know 
that  the  person  to  whom  he  pays  his  deposit  has  the  right  to 
sell  the  realty.  He  may  and  should  ask  the  seller  to  produce 
indicia  of  his  ownership.  This  the  seller  usually  does  by 
exhibiting  his  deed  of  the  property.  Or  if  opportunity  offers 
the  purchaser  may  examine  the  public  records  and  get  suffi- 
cient information  to  justify  payment  of  the  deposit.  If  the 
seller  is  an  executor,  trustee,  attorney  or  agent,  he  should 
show  the  instrument  appointing  him  as  such,  so  that  the  pur- 
chaser may  be  satisfied  that  he  has  power  and  authority  to  sell. 


44    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

If  the  seller  does  not  produce  proof  of  his  ownership  and 
authority  to  sell,  it  is  often  advisable  to  deposit  the  initial 
payment,  which  would  in  ordinary  course  be  delivered  on  sign- 
ing the  contract  by  the  purchaser  to  the  seller,  with  some  third 
person  agreed  upon  to  hold  in  escrow  until  the  seller  produces 
such  evidence.  Occasionally  the  seller  has  not  title  but  has  con- 
tracted to  buy  from  the  owner,  and  is  now  undertaking  to  sell 
before  he  has  taken  title.  In  such  a  case  the  purchaser  must 
consider  this  third  person  before  he  signs  a  contract.  He  will 
best  protect  himself  by  paying  only  a  small  deposit,  and  hav- 
ing the  contract  provide  for  a  definite  closing  date  without 
right  of  adjournment. 

"Witnesseth,"  the  word  following  the  names  of  the  parties, 
means  nothing  legally  or  practically  and  might  just  as  well 
be  left  out.  Anciently  it  had  a  meaning  and  it  survives  only 
because  it  usually  has  been  used. 

"That  the  seller  agrees  to  sell  and  convey."  These  words 
are  the  seller's  promise.  He  promises  not  only  to  transfer 
his  rights  but  also  to  deliver  the  necessary  instrument  (deed) 
to  transfer  his  title.  "And  the  purchaser  agrees  to  purchase" 
creates  the  mutual  obligation  by  the  purchaser's  acceptance  of 
the  seller's  offer,  thus  completing  the  consideration  which  sup- 
ports the  contract. 

Description  of  property. — "All  that  lot  or  parcel  of  land 
with  the  buildings  and  improvements  thereon,"  are  the  formal 
opening  words  of  the  description  of  the  property.  "All"  in- 
dicates that  the  contract  is  intended  to  cover  every  particle 
of  the  land  described  in  detail  following.  "With  the  buildings 
and  improvements  thereon,"  while  not  legally  necessary, 
should  always  be  included  to  contradict  any  presumption  of  an 
intent  to  except  from  the  sale,  any  of  the  structures  on  the  land. 

Next  follows  the  specific  description  of  the  realty.  The 
description  is  the  most  important  as  well  as  the  most  difficult 
part  of  the  contract.  While  it  is  not  necessary  to  describe  the 
realty  in  as  much  detail  in  the  contract  as  in  the  deed,  neverthe- 
less legal  rights  arc  being  created  by  the  contract  and  it  is 
of  importance  that  a  proper  description  be  used. 

Descriptions  are  of  four  kinds: 

1.  By  street  numbers  of  house. 

2.  By  lot  number  on  a  map. 

3.  By  metes  and  bounds. 

4.  By  monuments. 


CONTRACTS 


45 


Street  numbers. — A  description  by  street  number  would 
be  merely  following  the  printed  part  of  the  contract,  by  the 
words  "known  as  and  by  the  number  31  East  31st  Street/' 
Such  a  method  of  description  should  never  be  used  in  a  deed 
or  mortgage  but  is  sufficient  for  a  contract.  It  should  not 
be  used  to  describe  a  vacant  lot  or  plot. 

Lot  number  on  map. — Quite  often  the  owner  of  a  tract 
of  vacant  land  has  developed  it  by  cutting  through  streets 
and  subdividing  it  into  lots  upon  a  map  which  he  has  filed  in 
the  proper  county  office.  The  map  shows  the  various  blocks 
and  lots,  numbered  for  convenience  of  identification,  and  the 
map  bears  usually  a  title,  the  owner's  and  surveyor's  name 
and  the  date  of  survey.  For  example: 

Map  of  land  at  Mineola,  Nassau  Co.,  N.  Y.      Property  of  James  Smith.     Surveyed 
by  John  Jones,  C.  E.,  dated  June  1st,  1921 

Merrick  Road 


1 

2 

3 
BL 

4 
OC 

5 
K 

6 
B 

7 

8 

1 

2 
BL 

3 
OC 

4 
K 

5 
A 

6 

Land  of  Williams 

The  simplest  manner  of  describing  a  lot  upon  this  map 
would  be  "All  that  certain  lot,  piece  or  parcel  of  land,  known 
upon  a  'map  of  land  at  Mineola,  Nassau  County,  N.  Y.,  the 
property  of  James  Smith,  John  Jones,  surveyor,  June  1st, 
1921'  as  and  by  the  lot  number  7  in  Block  B."  Such  a  de- 
scription fully  identifies  the  lot  and  reference  to  the  map  on 
file  will  always  show  the  exact  location  of  the  lot.  The  sur- 
veyor always,  in  making  such  a  survey,  uses  some  permanent 
landmark  upon  the  plot  so  that  all  lots  may  be  physically 
located  by  measuring  from  it. 

Metes  and  bounds. — A  description  by  metes  and  bounds  is 
usually  found  in  the  cities.  Metes — measures,  and  bounds- 
direction,  make  possible  a  description  of  such  accuracy  as  is 
requisite  in  locations  where  land  is  of  considerable  value,  and 
boundaries  must  be  definitely  fixed.  Suppose  upon  the  fol- 
lowing diagram  the  realty  to  be  sold  is  the  lot  X.  A  de- 
scription of  this  lot  would  read  "Beginning  at  a  point  on  the 
southerly  side  of  Kent  Street,  100  feet  easterly  from  the  cor- 


46   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

Kent  Street 
N 


100 

20 

X 

8     8 

20 

ner  formed  by  the  intersection  of  the  southerly  side  of  Kent 
Street  and  the  easterly  side  of  Broadway;  thence  southerly 
parallel  to  Broadway  100  feet,  thence  easterly  parallel  to  Kent 
Street  20  feet,  thence  northerly  parallel  to  Broadway  100  feet 
to  the  southerly  side  of  Kent  Street,  and  thence  westerly  along 
the  southerly  side  of  Kent  Street,  20  feet  to  the  point  or  place 
of  beginning."  That  gives  an  exact  description,  each  side  be- 
ing meted,  i.e.,  measured  in  feet  and  bounded  i.e.,  direction 
indicated.  It  is  most  import  in  such  a  description  that  the 
point  of  beginning  be  carefully  identified  to  avoid  uncertainty 
of  location.  The  entire  description  is  worthless  if  there  is  an 
error  in  the  starting-point. 

The  property  just  described  is  what  is  known  as  a  regular 
lot;  that  is  the  front  and  rear  dimensions  are  the  same,  also 
the  sides,  and  the  angles  formed  are  right  angles  or  nearly  so. 
Many  times  it  is  necessary  to  draw  a  description  of  an  "irregu- 
lar lot,"  such  for  example  as  the  southerly  triangular  lot  shown 
on  the  following  diagram. 

£  £  J/  "  .  St / 


£  Z30"    St 


CONTRACTS 


47 


A  description  of  this  irregular  lot  would  read  as  follows: 
Beginning  at  a  point  on  the  northerly  side  of  East  230th 
Street,  200  feet  easterly  from  the  corner  formed  by  the  inter- 
section of  the  easterly  side  of  Bronxwood  Avenue  and  the 
northerly  side  of  East  230th  Street,  running  thence  northerly 
and  parallel  to  Bronxwood  Avenue,  110  and  2-100  feet, 
thence  easterly  parallel  to  East  230th  Street,  88  and  50-100 
reet;  thence  southwesterly,  138  and  91-100  feet  to  a  point  on 
the  northerly  side  of  East  230th  Street,  which  point  is  3  and 
70-100  feet  easterly  from  the  point  or  place  of  beginning, 
and  thence  westerly  along  the  northerly  side  of  East  230th 
Street,  3  and  70-100  feet  to  the  point  or  place  of  beginning. 
Monuments. — Outside  the  populous  districts  the  descrip- 
tion by  monuments  is  most  often  found.  There  are  but  few 
highways  and  little  necessity  for  exact  measurements.  A  farm 
for  example  is  shown. 


Farm   of  John  Robinson 
'Pleasant**  lie,  West  Chester  Co.,  M.X 


This  farm  may  be  described  without  mention  of  metes  or 
bounds  as  follows :  The  farm  of  John  Robinson  at  Pleasant 
ville  Westchester  County,  N.  Y.,  bounded  and  described  as 
follows:  Beginning  at  the  dock  on  Indian  Creek  at  the  foot 
of  Dock  Road,  thence  along  Dock  Road  to  the  point  where 
said  road  is  met  by  the  fence  dividing  the  farms  of  (the  seller) 
and  Jones,  thence  along  said  fence  to  the  side  of  Indian  Creek, 
and  thence  along  said  Indian  Creek  to  the  Dock,  the  point 
of  beginning. 


48    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

Selection  of  form  of  description. — The  first  and  second 
forms  of  description  are  often  used  alone.  The  third  and 
fourth  are  usually  combined.  The  first  or  third  are  sometimes 
used  to  supplement  the  third  or  fourth  or  a  combination  of 
the  third  and  fourth. 

It  is  sometimes  difficult  to  decide  what  form  of  description 
to  use.  The  contract  is  to  create  binding  obligations  and 
rights.  The  seller  must  use  a  description  under  which  he  can 
convey  good  title  and  the  purchaser  wants  a  description  that 
will  give  him  the  realty  he  intends  to  buy. 

Use  of  terms  "more  or  less." — The  seller  should  use  care  to 
undertake  to  convey  only  what  he  owns.  As  a  general  rule 
he  should  use  the  same  description  as  was  used  when  he  bought. 
If  he  has  reason  to  believe  that  he  has  not  as  much  depth  or 
width  of  land  as  his  deed  calls  for,  he  may  then  use  the  words 
"more  or  less."  "More  or  less"  is  a  question  of  reasonable- 
ness. Sometimes  a  variance  of  a  few  inches  is  unreasonable, 
as  in  the  width  of  a  city  lot,  while  a  foot  might  not  be  unrea- 
sonable in  the  depth  of  the  same  lot.  If  the  variance  is  reason- 
able the  seller  can  give  good  title  under  a  description  using 
the  words  "more  or  less."  The  purchaser  in  case  of  the  use 
of  "more  or  less"  will  often  have  the  contract  provide  mini- 
mum dimensions  or  area,  less  than  which  he  will  not  take.  If 
a  house  is  standing  on  the  lot  a  small  variance  makes  little 
difference  for  the  building  will  remain  and  produce  rent, 
whether  it  is  slightly  wider  or  narrower  than  the  lot. 

Description  of  improved  property. — A  purchaser  in  offer- 
ing to  buy  improved  property  is  always  presumed  to  be  intend- 
ing to  purchase  three  things:  1.  the  land,  2.  the  structure, 
capable  of  occupancy  and  rentable,  and  3.  the  right  to  main- 
tain it.  If  the  building  stands  in  from  the  lines  on  all  sides 
there  is  no  difficulty.  But  in  the  cities  a  building  is  usually 
constructed  to  fill  the  entire  width  of  the  lot. 

If  the  building  exactly  fills  the  lot,  not  encroaching  on  either 
side,  the  seller  may  use  any  description  which  accurately  de- 
scribes the  land;  the  building  will  pass  with  a  description  of 
the  land.  The  purchaser  may,  if  he  wishes  to  be  sure  he  is 
signing  a  contract  for  the  house  he  has  in  mind,  have  inserted 
after  the  description  the  words  "known  as  and  by  the  house 
number Street." 

Suppose,  however,  that  the  building  not  only  fills  the  entire 
lot,  but  encroaches  on  the  lot  alongside.  If  the  encroachment 


CONTRACTS  49 

is  not  in  excess  of  a  few  inches  or  the  building  has  been  stand- 
ing for  many  years,  an  easement  has  arisen  permitting  the 
building  to  remain.  In  such  case  a  description  by  street  num- 
ber would  be  improper  as  the  seller  does  not  own  and  cannot 
convey  the  building  and  all  the  land  upon  which  it  stands.  He 
should  use  a  description  which  will  describe  the  land  which 
he  owns  just  as  if  it  were  a  vacant  lot;  the  building  and  ease- 
ment will  follow  with  the  land  so  described.  The  seller  is  pro- 
tected for  he  is  only  undertaking  to  give  what  he  has  and  the 
purchaser  gets  what  he  intended  to  buy. 

Occasionally  the  building  on  the  lot  alongside  encroaches 
on  the  seller's  land,  so  that  the  seller  has  possession  of  less 
land  than  called  for  by  his  deed.  How  shall  he  then  sell 
safely?  He  may  use  a  description  taking  in  only  so  much  land 
as  is  actually  in  his  possession,  diminishing  his  width  dimen- 
sions as  much  as  necessary.  He  may  use  the  description  called 
for  by  his  own  deed  using  "more  or  less"  following  the  width 
dimensions.  Or  he  may  describe  merely  by  house  number. 
Under  any  of  those  descriptions  he  can  give  what  he  contracts 
to  convey. 

Limitations  and  restrictions. — It  is  customary  to  follow 
the  description  with  a  statement  of  the  limitations  subject 
to  which  the  property  is  to  be  sold.  The  most  common  is 
tenancies.  If  nothing  is  mentioned  in  the  contract  concerning 
tenants,  the  purchaser  is  entitled  to  receive  an  empty  house. 
Consequently  if  there  are  tenants  in  the  building,  the  nature 
of  their  rights  should  be  set  forth  in  a  provision  that  the  prop- 
erty is  sold  subject  to  the  rights  of  the  tenant  or  tenants  and 
specifying  rent,  duration  of  lease,  space  occupied  and  .any 
peculiar  facts  with  reference  to  each  tenant.  The  seller  pro- 
tects himself  by  merely  stating  that  he  sells  subject  to  the  ten- 
ants' rights,  but  the  purchaser  should  insist  on  full  details  be- 
ing set  forth. 

Any  restrictions  or  limitations  upon  the  use  of  the  property 
should  also  be  stated  at  this  point.  If  none  is  mentioned  the 
purchaser  is  entitled  to  the  realty  free  and  clear  of  any  such. 
The  seller  to  protect  himself  must  see  that  they  are  enumer- 
ated. The  seller's  land  and  the  neighborhood  may  be  re- 
stricted for  mutual  benefit,  to  buildings  of  certain  size,  char- 
acter and  price.  The  neighboring  owner  may  have  an  ease- 
ment to  use  the  side  wall  as  a  party  wall.  There  may  be  an 
agreement  between  the  seller  and  an  adjoining  owner  whereby 


50   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

each  undertakes  to  maintain  one-half  of  a  joint  driveway  be- 
tween their  buildings.  The  seller  may  have  given  consent  to 
trolley  or  elevated  railways  or  for  the  maintenance  of  electric 
or  telephone  wires  or  poles.  A  survey  of  the  property  may 
show  encroachments  or  other  variations.  These  are  examples 
of  restrictions  or  limitations  which  the  seller  should  have  in- 
serted in  the  contract. 

It  cannot  be  too  much  emphasized  that  the  seller  is  legally 
bound  to  give  an  absolutely  clear  title  free  from  all  encum- 
brances except  those  specifically  mentioned  in  the  contract. 
Any  encumbrances  upon  the  property  which  the  seller  fails  to 
except,  he  must  remove;  hence  the  care  he  should  use  in  mak- 
ing certain  to  state  those  encumbrances  subject  to  which  he 
sells  the  property.  The  following  is  an  illustration  of  the 
statement : 

"Subject  to  the  rights  of  present  tenants  as  monthly  ten- 
ants ;  to  covenants  and  restrictions  of  record  and  to  any  state 
of  facts  an  accurate  survey  may  show." 

This  clause  may  be  readily  altered  to  cover  any  encum- 
brances, or  amplified  if  the  purchaser  require  a  more  detailed 
statement. 

Financial  statement. — Next  upon  the  form  appear  the 
words  "the  price  is "  These  open  the  financial  state- 
ment. Here  is  set  forth  all  the  provisions  with -respect  to 
amount  and  terms  of  payment,  of  the  purchase  price.  Fol- 
lowing the  opening  words  the  total  price  to  be  paid  should  be 
inserted.  This  total  or  gross  price  is  divided  into 

1.  Deposit  on  contract. 

2.  Cash  on  closing. 

3.  Existing  mortgages. 

4.  Purchase  money  mortgage. 

It  is  not  necessary  that  every  contract  contain  all  four  divi- 
sions of  the  total  price.  There  is  nearly  always  provision  for 
a  deposit  on  signing  the  contract  and  for  cash  on  the  clos- 
ing. Sometimes  no  agreement  for  a  purchase  money  mort- 
gage is  made,  it  being  agreed  that  the  purchaser  shall  pay  all 
cash  over  the  existing  encumbrances.  Or  it  may  be  that  there 
is  no  encumbrance  on  the  property,  and  the  purchaser  is  to 
pay  all  cash,  in  which  event  only  the  first  two  divisions  would 
be  present. 

Deposit  on  contract. — The  deposit  is  the  amount  paid  by 
the  purchaser  to  the  seller  as  earnest  money.  Its  amount 


CONTRACTS  SI 

varies,  being  usually  from  5  per  cent  to  10  per  cent  of  the 
price.  This  deposit  is  forfeited  to  the  seller  if  the  purchaser 
defaults  in  carrying  out  the  contract.  Its  amount  is,  there- 
fore, always  an  important  question  to  be  agreed  upon  by  the 
parties,  and  is  regulated  by  various  considerations.  Their 
confidence  in  each  other  may  reduce  it.  A  long  time  between 
the  date  of  the  contract  and  the  date  agreed  on  for  the  closing 
of  title  should  increase  it,  for  during  this  period  the  property 
is  really  the  purchaser's  and  the  seller  cannot  seek  other  sale 
for  it.  The  deposit  should  be  large  enough  to  compensate 
the  seller  for  any  commission  which  he  must  pay  on  the  sale 
and  to  make  it  worthwhile  for  the  purchaser  to  complete  his 
contract,  even  if  he  repent  of  his  bargain.  The  seller  should 
also  endeavor  to  have  a  large  enough  deposit  so  that  the  bal- 
ance to  be  paid  is  less  than  the  property's  value,  so  that  in 
event  of  the  purchaser's  default  he  has  made  some  profit  on 
the  deposit  alone.  The  purchaser  naturally  having  nothing 
till  delivery  of  the  deed  is  anxious  to  make  as  small  a  deposit 
as  possible.  The  payment  of  the  deposit  is  acknowledged  in 
the  contract;  no  separate  receipt  is  necessary.  Payment  of 
the  deposit  is  usually  by  check  and  not  usually  certified.  Title 
does  not  pass  and  if  the  check  should  be  unpaid  the  contract 
could  be  avoided  by  the  seller.  However,  if  the  seller  is  mak- 
ing a  very  good  bargain  and  does  not  wish  to  lose  the  sale, 
he  may  insist  upon  receiving  the  deposit  in  cash  or  certified 
check. 

Cash  on  closing. — The  cash  on  closing  is  the  amount  to 
be  paid  by  the  seller  upon  delivery  of  the  deed, 
dollars  in  cash  upon  the  delivery  of  the  deed  as  hereinafter 
provided."  Some  forms  provide  for  payment  in  either  cash 
or  certified  check.  This  is  unwise.  Some  banks  may  be  quite 
unsound;  their  certification  being  of  no  value  should  they 
suddenly  fail.  The  seller  should  insist  upon  the  contract  pro- 
viding for  payment  in  cash,  then  if  he  wishes,  he  may  on  the 
closing  take  a  certified  check.  Since  the  deed  and  possession 
of  the  property  are  to  be  delivered  on  the  closing,  nothing 
less  than  cash  or  certified  check  should  be  taken  by  the  seller. 
The  amount  of  cash  to  be  paid  on  the  closing  of  title  naturally 
will  be  the  difference  between  the  total  price  and  the  deposit 
if  there  is  no  provision  for  existing  encumbrances  or  purchase 
money  mortgages.  If  there  are  such  it  is  the  difference  be- 
tween  the  total  price  and  the  sum  of  the  other  items. 


52    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

Existing  mortgage. — Nearly  all  improved  properties  in 
the  built-up  districts  are  mortgaged  for  part  of  their  value. 
These  mortgages  usually  remain  on  the  property  indefinitely. 
Most  contracts  of  sale,  therefore,  involve  in  their  financial 
statement  an  existing  mortgage.  The  mortgage  is  always  ac- 
companied by  a  bond,  or  note,  under  the  terms  of  which  the 
original  borrower  or  some  late  owner,  who  has  secured  an 
extension  of  its  time  of  payment,  has  undertaken  to  pay  the 
amount  of  the  loan  which  the  mortgage  was  given  to  secure. 
The  purchaser  may  take  the  realty  subject  to  this  mortgage 
or  he  may  assume  its  payment.  In  either  event  to  prevent 
foreclosure  of  the  mortgage  he  must  pay  the  interest.  If, 
however,  he  merely  buys  subject  to  the  mortgage  he  under- 
takes no  personal  obligation  to  pay  the  loan,  while  if  he  as- 
sumes the  mortgage  he  becomes  personally  liable  for  the  loan, 
and  should  the  property  under  foreclosure  not  bring  sufficient 
to  pay  the  mortgage,  interest  and  expenses,  he  would  be  per- 
sonally liable  for  the  deficiency.  For  obvious  reasons  the 
purchaser  usually  endeavors  to  have  the  contract  provide  that 
he  take  subject  to  the  mortgage.  In  actual  experience  the 
purchaser  seldom  assumes  the  mortgage. 

The  purchaser,  in  order  to  know  what  he  is  buying,  should 
always  secure  a  full  detailed  statement  of  the  terms  of  the 
existing  mortgage,  particularly  the  principal  amount,  interest 
rate,  interest  payment  dates,  name  of  the  mortgagee,  and  the 
date  when  the  principal  of  the  mortgage  is  payable.  This  last 
is  very  important.  The  purchaser  must  know  when  he  may 
be  compelled  to  pay  or  renew  the  mortgage.  Possibly  he  can 
not  pay  it  and  has  reason  to  believe  he  could  not  procure  a 
new  loan  for  as  great  an  amount.  He  wants  to  have  time 
to  prepare.  He  might  not  buy  at  all  if  the  mortgage  were 
to  become  due  very  soon.  If,  on  the  other  hand,  he  thinks  the 
mortgage  is  low;  that  he  could  procure  a  larger  loan,  he  is 
desirous  that  it  become  due  shortly.  If,  in  any  way,  the  seller 
has  any  control  over  or  option  in  respect  to  the  mortgage  or 
any  of  its  terms  the  purchaser  should  see  that  the  contract 
make  proper  provision  to  protect  his  desires  or  requirements. 

Purchase  money  mortgage. — The  purpose  of  a  purchase 
money  mortgage  is  to  take  the  place  of  cash  for  part  of  the 
price.  The  purchaser  may  not  have  sufficient  cash  to  pay  the 
full  price  over  the  existing  mortgage,  and  the  seller  may  be 
willing  to  leave  part  of  the  price  as  a  loan  to  the  purchaser. 


CONTRACTS  53 

In  order  that  the  seller  may  be  protected  from  loss  upon  the 
loan,  the  purchaser  makes  the  loan  a  lien  upon  the  property. 
The  purchaser  gives  his  bond  for  the  amount  agreed  upon 
and  a  purchase  money  mortgage  pledging  the  property  as  se- 
curity. No  general  rule  can  be  made  as  to  a  safe  amount  to 
leave  on  purchase  money  mortgage.  However,  in  any  event 
the  seller  should  always  see  that  he  receives  enough  cash  to 
more  than  pay  the  cost  of  foreclosing  the  mortgage  and  to 
more  than  cover  any  depreciation  in  the  property,  accrued  in- 
terest and  unpaid  taxes. 

As  to  the  purchase  money  mortgage,  the  contract  should 
specify  the  date  and  manner  of  payment  of  the  principal  sum, 
the  interest  rate,  interest  payment  dates,  and  the  seller  should 
require  an  appropriate  form  of  bond  and  mortgage,  such  as 
in  its  incidental  provisions  will  give  him  full  protection;  par- 
ticularly with  reference  to  default  in  the  existing  mortgage. 
For  this  reason  also  the  contract  should  provide  that  the  bond 
and  mortgage  be  prepared  by  the  seller's  attorney.  Since  the 
purchase  money  mortgage  is  taken  by  the  seller  as  an  accom- 
modation to  the  purchaser,  it  is  customary  to  provide  that  the 
purchaser  shall  pay  all  expenses  in  connection  with  it,  consist- 
ing of  cost  of  drawing  the  instruments,  the  recording  fees,  the 
mortgage  tax  (if  any)  and  the  internal  revenue  stamps  on 
the  bond.  The  purchaser  should  always  seek  a  provision  that 
the  purchase  money  mortgage  shall  be  and  remain  subordinate 
to  the  present  existing  mortgage  or  any  mortgage  to  secure 
a  similar  amount  in  event  of  payment  thereof. 

The  following  is  an  example  of  financial  statement  embrac- 
ing all  the  parts: 

The  price  is  $20,000  payable  as  follows: 

$1,000  on  the  signing  of  this  contract,  the  receipt  of  which  is  hereby 
acknowledged. 

$4,000  in  cash  on  the  delivery  of  the  deed  as  hereinafter  provided. 

$10,000  by  the  purchaser  taking  title  to  the  premises  subject  to  a  mortgage 

now  a  lien  thereon  for  that  amount  due bearing  interest  at  the 

rate  of per  cent  per  annum,  payable  semi-annually  on .^ 

and (If  purchaser  assumes  the  mortgage  add  "which  the 

purchaser  shall  assume  and  promise  to  pay.") 

$5,000  by  the  purchaser  executing  and  delivering  on  the  closing  of  title,^his 
bond  for  that  amount  secured  by  his  purchase  money  mortgage,  payable 

with  interest  from  the  date  of  closing  title  at  the  rate  of 

per  cent  per  annum,  payable  semi-annually. 

Said  bond  and  mortgage  shall  contain  a  provision  that  this  mortgage  shall 
be  and  remain  subordinate  to  the  present  first  mortgage,  or  in  event  of  its 


54    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

payment,  to  any  new  mortgage  for  an  amount  not  in  excess  thereof;  to  be 
drawn  upon  the  usual  (here  insert  "Title  Co."  or  other  identifying  words) 
forms  by  the  attorney  for  the  seller  at  the  purchaser's  expense,  who  shall  pay 
the  recording  fees,  mortgage  tax  (if  any)  and  for  internal  revenue  stamps  on 
the  bond. 

Installment  contracts. — In  some  instances,  particularly  in 
the  sale  of  vacant  lots,  it  is  found  that  the  purchaser  has  not 
sufficient  cash  to  pay  a  deposit  and  within  the  usual  period 
take  title,  paying  the  balance.  Possibly  the  purchase  does  not 
seem  desirable  on  those  terms.  Yet  he  would  be  willing  and 
able  to  pay  the  price  in  installments.  In  such  events  it  is  usual 
to  have  the  financial  clause  provide  for  times  and  amounts  of 
installments  at  stated  intervals,  and  the  payments  to  be  applied 
first  to  interest  on  the  purchase  price,  then  to  payment  of 
charges  such  as  taxes  as  they  accrue,  and  finally  towards  pay- 
ment of  the  unpaid  balance  of  purchase  price.  Under  such 
a  contract  it  is  usually  agreed  that  the  deed  shall  not  be  de- 
livered until  a  certain  amount  has  been  paid  upon  the  price. 
The  usual  custom  is  for  the  purchaser  to  give  a  purchase  money 
mortgage  for  the  balance  of  the  price,  the  mortgage  to  be 
paid  in  such  manner  as  may  be  agreed  upon.  For  the  seller's 
protection,  the  contract  should  also  provide  that  in  event  of 
a  default  in  payment  by  the  purchaser,  the  contract  be  can- 
celled and  all  sums  paid  by  the  purchaser  be  deemed  rent  for 
the  period  from  the  time  he  took  possession  up  to  the  default. 
(Appendix  forms  12  and  13.) 

Closing  date  and  place. — Following  the  space  for  the  fi- 
nancial statement  appear  the  words  "The  deed  shall  be  deliv- 
ered upon  receipt  of  said  payment  at  the  office  of 

at 19 ...     The  blanks  should  be  filled  with 

the  place  and  time  at  which  title  is  to  be  closed.  The  place  of 
closing  should  be  agreed  upon;  there  is  no  governing  custom. 
Usually  the  office  of  the  attorney  representing  either  party,  a 
title  company  or  the  broker's  office  is  selected.  If  no  time  is 
set  a  reasonable  time  is  assumed  to  be  intended.  For  con- 
venience a  date  and  hour  is  ordinarily  set.  Unless  the  con- 
tract specifically  provides  that  time  is  "of  the  essence,"  either 
party  is  entitled  if  need  be  to  an  adjournment  for  a  reasonable 
time. 

Miscellaneous  provisions. — The  first  of  these  appears 
usually  in  the  paragraph  setting  the  closing  date.  It  is  cus- 
tomary to  arrange  as  far  as  possible  for  the  seller's  interest  to 


CONTRACTS  55 

cease  and  the  purchaser's  commence  on  the  day  the  title  is 
closed  and  the  deed  delivered.  Hence  the  provision  "rents" 
and  interest  on  mortgages  and  fire  insurance  premiums,  if 
any,  are  to  be  apportioned.  Under  this  stipulation  while  the 
seller  may  have  collected  rents  covering  a  period  extending 
beyond  the  date  of  transfer,  he  must  pay  or  allow  to  the  pur- 
chaser the  fair  proportion  of  the  rents  which  will  be  earned 
after  the  transfer.  So,  too,  the  interest  on  the  existing  mort- 
gage, if  there  be  one,  has  been  accruing  since  the  last  interest 
date,  and  on  the  next  interest  date  the  amount  of  interest 
for  the  full  period  will  be  payable.  The  seller  allows  to  the 
purchaser  the  fair  proportion  of  the  interest  which  has  accumu- 
lated up  to  the  date  of  closing  title.  Fire  insurance  policies 
are  paid  for  in  advance  for  a  period  of  usually  several  years. 
Of  course  the  seller  might  cancel  his  policies  and  the  purchaser 
secure  new  ones.  But  the  surrender  value  is  less  than  the 
proportion  of  the  premium  for  the  remaining  period,  hence 
the  seller  usually  seeks  to  have  the  purchaser  take  over  the 
present  policies  and  pay  the  seller  the  proportion  of  the  pre- 
mium for  the  time  remaining  till  expiration. 

The  contract  may,  if  agreed  upon,  provide  for  adjustment  of 
other  items.  Of  these,  the  most  common  are  land  taxes. 
Land  taxes  are  levied  for  a  certain  definite  period,  and  de- 
pending upon  the  law  of  the  place  where  the  property  is  lo- 
cated, may  be  payable  at  the  beginning  of  the  period,  during 
it  or  at  its  expiration.  In  some  States,  the  law  provides  that 
taxes  shall  be  adjusted  unless  the  contract  specifically  provides 
to  the  contrary.  In  New  York  City  and  many  other  places  the 
reverse  is  true;  unless  the  contract  directs  an  adjustment,  the 
seller  shall  pay  all  taxes  due  prior  to  the  date  of  closing  title. 
For  example :  In  New  York  taxes  are  levied  for  the  calendar 
year;  one-half  payable  May  1st  and  one-half  November  1st. 
Suppose  title  is  set  to  close  June  1st.  If  the  contract  make 
no  mention  of  adjustment  of  taxes,  the  seller  must  pay  the 
half  due  May  1st,  although  that  covers  the  period  to  July  1st. 
If  the  contract  provides  for  adjustment  of  taxes,  the  purchaser 
would  have  to  pay  the  month  of  June,  or  one-sixth  of  the 
amount  due  May  1st.  In  New  York  City  it  is  now  becoming  cus- 
tomary to  provide  for  adjustment  of  taxes,  particularly  in 
cases  where  valuable  properties  are  concerned. 

Provision  for  broker's  commission. — The  form  of  con- 
tract under  discussion  contains  as  its  next  paragraph,  "The 


56    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

seller  agrees  that brought  about  this  sale 

and  agrees  to  pay  the  broker's  commission  therefore.  This 
provision  is  entirely  unnecessary  to  the  validity  of  the  contract. 
Its  omission  does  not  even  affect  the  broker's  claim  for  com- 
mission. He  becomes  entitled  to  his  commission  as  soon  as 
he  has  brought  about  the  agreement.  The  only  object  gained 
by  its  insertion  in  the  contract  is  as  a  specific  declaration  by 
the  parties  that  the  broker  brought  about  the  sale. 

Apportionment  of  water  charges. — Water  is  a  commodity 
furnished  by  either  the  municipality  or  some  private  agency. 
If  charged  at  a  flat  rate  according  to  "frontage"  and  equip- 
ment in  the  building,  there  is  usually  no  apportionment  of  the 
charge.  If  however,  as  is  becoming  the  case  of  late  years,  a 
meter  is  installed,  and  a  charge  made  on  actual  water  used, 
then  it  is  customary  to  make  an  apportionment.  Readings 
are  taken  and  bills  rendered  usually  quarterly.  It  is  a  simple 
matter  to  compute  the  probable  amount  of  water  used  since  the 
last  reading,  and  the  charge  for  this  should  be  allowed  by  seller 
to  purchaser.  For  great  accuracy  the  contract  may,  as  in  the 
form  given,  require  the  seller  to  furnish  a  reading  made  within 
thirty  days  of  the  closing  date. 

Street  rights. — The  next  paragraph  is  a  specific  declara- 
tion by  the  seller  that  he  intends  his  sale  of  the  premises  de- 
scribed in  the  contract  to  include,  and  will  convey  also,  what- 
ever rights  or  title  he  may  have  to  the  center  line  of  any  ad- 
joining street.  The  principal  value  of  such  right  or  title  is 
that  should  the  municipality  ever  take  title  to  the  street  an 
award  would  be  payable  to  the  owner.  The  award  might  be 
considerable  and  the  purchaser  should  always  see  that  the  con- 
tract contains  this  agreement.  In  addition  further  to  accom- 
plish this  purpose  the  same  paragraph  further  assigns  and 
obligates  the  seller  to  assign  to  the  purchaser  any  award  already 
made. 

Form  of  deed. — "The  deed  shall  be  in  proper  statutory 
form  for  record,"  etc.  This  is  most  important.  At  no  place 
in  the  contract  up  to  this  point  has  the  seller  stated  any  particu- 
lar form  of  deed  he  would  deliver.  He  might  give  any  kind 
of  deed  which  was  sufficient  to  pass  title.  He  must  under  this 
clause  use  the  form  prescribed  by  law  and  which  is  short, 
contains  no  useless  verbiage  and  is  therefore  more  satisfactory 
and  cheaper  to  record.  In  the  form  of  contract  under  dis- 
cussion, ,it  further  provides  that  the  deed  shall  contain  the 


CONTRACTS  57 

usual  covenants  and  warranties  by  which  the  seller  guarantees 
to  the  purchaser  the  title  and  the  rights  conveyed  by  the  deed. 
These  covenants  are  very  valuable  to  the  purchaser.  A  dis- 
cussion of  them  will  be  found  in  the  chapter  on  Deeds.  It  is 
usual,  though  not  compulsory,  for  the  seller  to  agree  to  give 
such  a  deed.  Occasionally  the  seller  will  give  no  covenants  and 
the  contract  must  then  be  altered  to  so  state.  The  purchaser 
in  such  case  should  seek  advice  as  to  whether  or  not  he  may 
safely  take  the  form  of  deed  which  the  seller  desires  to  give. 

The  deed  "shall  be  duly  executed  and  acknowledged  by  the 
seller  at  the  seller's  expense,  and  in  form  for  recording."  The 
seller  obligates  himself  to  sign  and  deliver  the  deed;  the  pur- 
chaser may  desire  to  have  this  particular  seller's  covenants  by 
reason  of  his  solvency  where  he  would  not  take  the  deed  from 
another.  Without  this  stipulation  the  seller  could  convey  to 
a  dummy  and  tender  the  dummy's  deed  to  the  purchaser. 
The  seller  must  also  bear  all  expense  of  the  deed.  This  is  fair, 
as  delivery  of  the  deed  is  part  of  the  transfer.  For  his  own 
protection  the  purchaser  should  record  his  deed  upon  the  public 
records;  hence  the  provision  that  the  deed  be  u  in  form  to  be 
recorded." 

The  vital  necessity  that  the  contract  set  forth  fully  the  exact 
state  of  the  title  and  encumbrances  is  apparent  from  the  next 
provision  that  the  seller  shall  deliver  such  a  deed  uas  to  convey 
to  the  purchaser  the  fee  simple  of  the  premises,  free  of  all  in- 
cumbrances  except  as  herein  stated."  By  this  clause  the  seller 
absolutely  covenants  to  give  a  full,  free  title  except  for  such 
encumbrances  as  are  stated.  The  exception  following,  refer- 
ring to  the  zoning  restrictions,  applies  only  to  New  York  City 
and  so  much  property  therein  being  affected,  this  clause  now 
usually  appears  in  the  printed  part  of  the  form. 

Existing  mortgage. — The  paragraph  referring  to  the  ex- 
isting mortgage,  if  any,  relieves  the  purchaser  of  doubt  or 
speculation  as  to  its  terms,  which  may  have  been  modified,  and 
obligates  the  seller  to  procure  and  deliver  at  his  expense,  as 
he  properly  should,  recordable  proof  of  the  amount  and  in- 
terest rate  of  such  mortgage. 

Violations  of  municipal  ordinances. — Under  the  police 
power  various  municipal  departments  are  empowered  to  pre- 
scribe rules  and  regulations  for  the  character,  conduct  and 
condition  of  buildings.  These  rules  are  enforced  in  event  of 
disregard  by  filing  notice  of  violation  against  the  property  and 


58    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

later  by  fine  or  judgment.  The  notice  of  violation  of  itself  is 
not  in  law  an  encumbrance  or  lien  on  the  property,  though 
complying  with  the  violation  is  expensive  and  failure  to  remedy 
the  defect  may  result  in  serious  trouble.  The  violation  not 
being  a  lien  the  seller,  but  for  this  clause  in  the  contract,  could 
saddle  the  purchaser  with  immediate,  possibly  large  expenses. 
Hence  the  purchaser's  insistence  on  this  agreement. 

Personal  property. — Many  articles  used  in  a  building  are 
practically  part  of  it,  yet  legally  the  question  of  whether  or 
not  they  were  included  in  the  sale,  if  not  specifically  mentioned, 
might  give  rise  to  dispute,  such  as  shades,  curtains,  janitors' 
tools,  runners,  etc.  A  great  deal  of  trouble  also  has  been 
occasioned  by  reason  of  the  owner  turning  over  to  the  purchaser 
without  any  explanation  articles  to  which  he  has  no  title,  having 
not  yet  paid  for  them,  as  gas  stoves,  ice  boxes,  etc.  To  pre- 
vent quibbling  and  to  compel  the  seller  to  state  positively  his 
ownership,  the  contract  reads,  UA11  personal  property  appur- 
tenant to  or  used  in  the  operation  of  said  premises  is  repre- 
sented to  be  owned  by  the  seller  and  is  included  in  this  sale.'7 

Deposit  money  a  lien. — By  law  the  deposit  paid  by  the 
purchaser  is  a  lien  upon  the  property,  but  so  that  there  may 
be  no  doubt  it  is  customary  to  expressly  stipulate  that  not  only 
the  deposit  but  the  reasonable  expense  of  examination  of  title, 
shall  be  liens  upon  the  property.  And  it  is  only  fair  for  the 
seller's  protection  that  the  contract  further  provide  that  they 
shall  not  continue  liens  after  default  by  the  purchaser. 

Loss  in  case  of  fire. — Equitably,  the  premises  belong  to  the 
purchaser  from  the  time  the  contract  is  made.  The  purchaser 
however  is  not  in  possession  and  presumably  expects  to  re- 
ceive the  property  in  substantially  the  same  condition  as  when 
he  signed  the  contract.  Should  there  be  a  fire  loss  it  might  be 
questionable  who  should  bear  the  loss.  To  avoid  this,  the 
contract  expressly  states  uThe  risk  of  loss  or  damage  to  said 
premises  by  fire  until  the  delivery  of  the  deed  is  assumed  by  the 
seller." 

Binding  on  heirs  and  executors. — The  parties  having  made 
a  contract  and  both  desiring  that  it  be  consummated,  agree,  for 
the  purpose  of  preventing  anything  arising  to  prevents  its 
completion  that  "The  stipulations  herein  are  to  apply  to  and 
bind  the  heirs,  executors,  administrators,  successors  and  as- 
signs of  the  respective  parties."  So  if  the  seller  die  his  heirs 
or  executors  taking  title  must  carry  out  the  contract  in  his 


CONTRACTS  59 

stead  and  convey.  In  like  manner  if  the  purchaser  die  his 
executors,  or  administrators  shall  pay  as  provided  in  the 
contract.  Any  person  taking  title  from  the  seller,  knowing  of 
the  contract  may  be  compelled  to  convey.  If  the  purchaser 
assign  his  contract  however,  he  is  met  with  another  proposi- 
tion. He  is  endeavoring  to  assign  an  obligation.  Should  his 
assignee  not  carry  out  the  contract,  the  seller  may  fall  back  on 
the  purchaser  and  compel  his  performance  of  its  terms.  The 
purchaser's  only  protection  when  he  assigns  his  contract  is  to 
take  an  express  promise  of  performance  from  his  assignee. 

Execution  of  the  contract. — The  law  requires  the  contract 
to  be  signed  by  the  party  to  be  bound.  The  duplicate  copies 
are  customarily  each  signed  by  both  parties.  Signing  may  be 
by  subscribing  one's  name  or  if  unable  to  write,  by  marking. 
Any  mark  made  with  intention  that  it  constitute  signing  is  suf- 
ficient. Mere  signing  makes  a  valid  contract.  The  seal, 
acknowledgment,  and  witnesses  are  not  necessary. 

It  is  advantageous  to  seal  the  instrument.  It  raises  a  pre- 
sumption that  the  person  who  has  affixed  his  seal  received  a 
consideration.  It  places  the  burden  upon  him  of  disproving 
it,  should  he  desire  to  defeat  the  contract.  Another  advan- 
tage of  sealing  the  contract  is  that  when  sealed,  the  obligations 
of  the  parties  are  kept  alive  by  law  for  a  greater  length  of 
time,  the  statute  of  limitations  on  sealed  instruments  being 
much  longer  than  on  instruments  not  under  seal.  The  seal, 
however,  has  not  the  advantage  of  restricting  the  obligation  to 
the  one  signing  the  contract.  An  undisclosed  principal  may, 
notwithstanding  the  seal,  be  held. 

Witnessing  the  instrument  accomplishes  little.  It  is  con- 
venient as  a  memorandum  of  the  fact  that  the  witness  was 
present  and  saw  the  parties  sign. 

No  instrument  can  be  recorded  unless  acknowledged  or 
proven.  While  contracts  are  not  usually  recorded,  neverthe- 
less in  exceptional  cases,  if  fraud  is  suspected  great  harm  may 
be  avoided  if  the  contract  be  placed  on  record  and  public  notice 
of  its  terms  so  given.  For  this  reason  it  is  very  often  wise  to 
have  the  contract  acknowledged.  This  is  done  by  the  parties 
acknowledging  their  execution  of  the  instrument,  before  an 
officer  to  whom  they  are  known  to  be  the  persons  executing  the 
instrument  and  who  is  empowered  by  law  to  take  acknowledg- 
ments. The  officer  then  signs  a  certificate  of  acknowledgment 
upon  the  instrument.  If  the  parties  either  cannot  or  will  no* 


60    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

acknowledge  the  instrument,  the  fact  may  be  proven  by  the 
witness,  who  swears  before  the  proper  officer  that  he  was  pres- 
ent and  saw  the  parties  sign  the  instrument,  that  he  knew  them 
to  be  the  persons  described  in  the  paper.  The  officer  then 
signs  a  certificate  of  these  facts  on  the  instrument,  and  it  can 
be  recorded.  (Appendix  forms  15  to  28.) 

Non-performance  of  contracts. — Usually  contracts  of  sale 
are  fully  carried  out  but  the  occasional  breach  renders  neces- 
sary some  understanding  of  the  rights  and  liabilities  which  in 
that  event  may  be  invoked.  The  default  may  be,  obviously, 
by  either  party. 

If  the  seller  fail  to  carry  out  the  contract,  his  failure  may 
arise  from  either  of  two  causes,  unwillingness  or  inability,  each 
of  which  gives  the  purchaser  different  remedies.  The  seller 
may  be  able  to  fulfill  the  contract  but  unreasonably  refuse  to 
do  so.  In  such  case  the  purchaser  may  pursue  any  of  three 
courses.  First,  he  may  recover  the  amount  of  his  deposit  with 
interest  and  the  reasonable  expense  he  has  incurred  in  exam- 
ination of  the  title.  Second,  he  may,  if  the  seller  still  has  title 
to  the  property,  bring  an  action  to  compel  the  seller  to  specifi- 
cally perform  the  contract.  If  he  is  successful  in  his  action, 
the  seller  must  carry  out  the  terms  of  the  contract  or  he  may 
be  jailed  until  he  docs  so.  Third,  the  purchaser  may,  if  he 
wish,  or  if  the  seller  has  disposed  of  the  property,  sue  for  the 
loss  of  his  bargain,  in  which  case  he  may  recover  as  his  dam- 
ages the  difference  between  the  value  of  the  property  and  what 
he  agreed  by  his  contract  to  pay  for  it.  Should  the  value  be 
less  than  the  price,  of  course  this  remedy  is  ineffectual. 

The  seller  may  however  be  quite  willing  to  carry  out  the 
contract  but  be  compelled  to  default  by  his  inability  to  give 
the  title  he  has  promised.  His  title  may  not  be  clear,  there 
may  be  other  people  who  have  some  interest.  In  such  case, 
if  the  seller  acted  in  good  faith,  knowing  nothing  of  the  defect, 
the  purchaser  may  recover  only  the  amount  of  his  deposit  and 
interest  and  title  examination  expenses.  But  if  the  seller, 
knowing  of  the  flaw  in  his  title,  permitted  the  purchaser  to  act 
to  his  detriment  in  entering  into  the  contract,  then  the  pur- 
chaser may  recover  for  the  loss  of  his  bargain;  the  difference 
between  the  value  of  the  property  and  the  selling  price. 

The  purchaser  in  signing  the  contract,  having  only  himself 
to  consider  and  not  having  to  deliver  title  to  property,  which 
may,  without  his  knowledge  have  some  defect,  does  not  receive 


CONTRACTS  61 

as  much  consideration  as  the  seller.  He  should  not  undertake 
the  obligation  of  the  contract  unless  he  sees  his  way  clear  to 
perform  his  part.  Should  he  default,  his  seller  may  either 
(A)  forfeit  the  deposit  and  cancel  the  contract,  (B)  bring 
an  action  against  the  purchaser  for  specific  performance,  or 
(C)  sue  for  his  damages — the  difference  between  the  value  of 
the  property  and  the  price  the  purchaser  agreed  to  pay,  this 
relief  being  appropriate  naturally  only  if  the  price  exceeds  the 
property's  value. 

Contracts  for  exchange  of  real  estate. — In  the  contract 
just  discussed  the  purchaser  agreed  to  pay  cash  for  the  prop- 
erty. Hence  its  name — contract  of  sale.  Occasionally  the 
purchaser  does  not  wish  to  pay  cash,  but  has  some  real  estate 
of  his  own  of  which  he  wishes  to  dispose  and  which  the  seller 
is  willing  to  take  in  part  or  full  payment.  In  this  event  the 
contract  for  exchange  is  used. 

Form  of  contract  for  exchange. — The  following  is  a  usual 
form  of  this  contract,  and  contains  the  customary  clauses, 
though,  as  said  with  reference  to  the  contract  of  sale,  any  form 
may  be  used  which  contains  the  necessary  elements  of  a  con- 
tract. 

AGREEMENT,  made  and  dated  between 

hereinafter  described  as  party  of  the  first  part,  and 

hereinafter  described  as  party  of  the  second  part,  for  the  exchange  of  real 
property; 

Witnesseth  as  follows: 

The  party  of  the  first  part,  in  consideration  of  one  dollar,  the  receipt  of 
which  is  hereby  acknowledged,  and  of  the  conveyance  by  the  party  of  the  second 
part  hereinafter  agreed  to  be  made,  hereby  agrees  to  sell,  grant  and  convey  to 
the  party  of  the  second  part,  at  a  valuation,  for  the  purpose  of  this  contract,  of 

Dollars, 
All  that  land  with  the  buildings  and  improvements  thereon  in  the 


The  premises  which  are  to  be  conveyed  by  the  party  of  the  first  part  shall  be 
conveyed  subject  to  the  following  encumbrances: 


62   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

The  party  of  the  second  part,  in  consideration  of  one  dollar,  the  receipt  of 
which  is  hereby  acknowledged,  and  of  the  conveyance  by  the  party  of  the  first 
part  hereinbefore  agreed  to  be  made,  hereby  agrees  to  sell,  grant  and  convey 
to  the  party  of  the  first  part,  at  a  valuation  for  the  purpose  of  this  contract,  of 

Dollars, 
ALL  that  land  with  the  buildings  and  improvements  thereon  in  the 


The  premises  which  are  to  be  conveyed  by  the  party  of  the  second  part  shall 
be  conveyed  subject  to  the  following  encumbrances: 


The  difference  between  the  values  of  the  respective  premises,  over  and  above 
encumbrances,  for  the  purpose  of  this  contract,  shall  be  deemed  to  be 

Dollars,  and  that  sum  shall  be  due  and  payable  as  follows,  by  the  party  of  the 


The  deeds  shall  be  delivered  and  exchanged  at  the  office  of 
at  o'clock  on  191 

It  is  agreed  by  the  respective  parties  hereto  that 
brought  about  this  exchange  and  that  the  brokerage  shall  be  paid  as  follows: 

Rents  and  interest  on  mortgages  and  insurance  premiums,  if  any,  are  to  be 
apportioned,  and  the  risk  of  loss  or  damage  to  the  premises  by  fire,  until  the 
delivery  of  the  deeds,  is  to  be  borne,  by  the  respective  sellers. 

If  there  be  water  meters  on  the  premises,  the  respective  sellers  shall  furnish 
readings  to  dates  not  more  than  thirty  days  prior  to  the  time  herein  set  for 
closing  title  and  the  unfixed  meter  charges  for  the  intervening  time  shall  be 
apportioned  on  the  basis  of  such  last  readings. 

If  there  be  a  mortgage  on  the  premises  and  such  mortgage  has  been  reduced 
by  payments  on  account  of  the  principal  thereof,  then  the  seller  agrees  to  deliver 
to  the  purchaser  at  the  time  of  delivery  of  the  deed  a  proper  certificate  executed 
and  acknowledged  by  the  holder  of  such  mortgage  and  in  form  for  recording, 
certifying  as  to  the  amount  of  the  unpaid  principal  sum  of  such  mortgage  and 
rate  of  interest  thereon,  and  the  seller  shall  pay  the  fees  for  recording  such 
certificate. 

All  personal  property  appurtenant  to  or  used  in  the  operation  of  said  premises 
is  represented  to  be  owned  by  the  respective  sellers  and  is  included  in  this 
exchange. 

All  notes  or  notices  of  violation  of  law  or  municipal  ordinances,  orders  or 
requirements  noted  in  or  issued  by  the  Tenement  House  or  Building  Depart- 


CONTRACTS  63 

ment  or  Health  Department  against  or  affecting  either  of  the  premises  above 
described  at  the  date  hereof,  shall  be  complied  with  by  the  respective  sellers 
thereof,  and  the  premises  shall  be  conveyed  free  of  the  same.  The  sellers  shall 
furnish  the  purchasers  with  an  authorization  to  make  the  necessary  searches 
therefor. 

This  contract  covers  all  right,  title  and  interest  of  the  respective  sellers,  of, 
in  and  to  any  lands  lying  in  the  bed  of  any  street,  road  or  avenue,  opened  or 
proposed,  in  front  of  or  adjoining  the  premises  to  be  conveyed,  to  the  centre 
line  thereof,  or  all  right,  title,  and  interest  of  the  respective  sellers  in  and  to 
any  awards  made  or  to  be  made  in  lieu  thereof,  and  the  sellers  will  execute 
and  deliver  to  the  purchasers,  on  closing  of  title  or  thereafter,  on  demand,  all 
proper  instruments  for  the  conveyance  of  such  title  and  the  assignment  and 
collection  of  such  awards. 

Each  of  the  parties  agrees  to  convey  the  property  hereinbefore  described  as 
sold  by  such  party  respectively,  free  from  all  encumbrances,  except  as  above 
specified,  and  to  execute,  acknowledge  and  deliver  to  the  other  party,  or  to  the 
assigns  of  the  other  party,  a  deed  in  proper  statutory  short  form  for  record  con- 
taining the  usual  full  covenants  and  warranty,  so  as  to  convey  to  the  grantee 
the  fee  simple  of  said  premises  free  from  all  encumbrances  except  as  herein 
stated,  and  except  restrictions  imposed  by  City  of  New  York  under  resolution  of 
the  Board  of  Estimate  and  Appointment,  adopted  July  25,  1916,  and  acts  amen- 
datory and  supplemental  thereto.  The  deed,  in  each  case,  shall  be  drawn  at 
the  cost  of  the  party  of  the  first  part  thereto. 

The  stipulations  aforesaid  are  to  apply  to  and  bind  the  heirs,  executors,  ad- 
ministrators, successors  and  assigns  of  the  respective  parties. 
Witness  the  signatures  and  seals  of  the  above  partief. 
In  Presence  of 

(L.  S.) 
(L.  S.) 
(L.  S.) 
(L.  S.) 

Divisions  of  the  contract. — An  analysis  of  this  form  shows 
that  it  is  similar  in  many  respects  to  the  contract  of  sale,  except 
that  the  price  is  paid  wholly  or  partly  in  property  instead  of 
cash.  The  instrument  is  dated  and  contains  the  names  of  the 
parties  just  as  the  contract  of  sale,  except  that  for  convenience 
they  are  termed  "party  of  the  first  part"  and  "party  of  the 
second  part."  Usually  the  person  who  pays  no  cash  whatever 
is  designated  as  the  first  party. 

Since  the  properties  are  being  exchanged  and  no  cash  or  only 
a  small  amount  passing,  the  parties  may  set  any  value  they 
wish  upon  the  properties  to  be  exchanged.  They  may  agree 
on  any  values  just  so  they  do  not  affect  the  cash  difference  to 
be  paid.  They  might  recite  a  nominal  value  for  each  property. 
Usually  the  values  agreed  upon  are  inflated.  Following  the 
names  of  the  parties,  are  set  forth  the  agreed  value  of  the  first 
party's  realty,  its  description  and  the  encumbrances  subject  to 
which  it  is  sold.  Then  follows  a  similar  statement  with  refer- 
ence to  the  second  party's  property.  As  in  the  contract  of 


64    RE  A  LEST  ATE  PRINCIPLES  AND  PRACTICES 

sale  the  description  and  enumeration  of  encumbrances  should 
be  full  and  accurate. 

Financial  statement. — Here  is  set  down  the  amount  of  dif- 
ference in  value  agreed  upon,  and  which  party  shall  pay  it  and 
how.  For  example:  The  first  party  owns  X  which  it  is 
agreed  is  worth  $25,000,  and  which  he  is  to  convey  subject  to 
a  $15,000  mortgage.  The  second  party  owns  Y  agreed  to 
be  worth  $20,000  which  he  will  convey  subject  to  a  $14,000 
mortgage.  In  this  case  the  first  party's  equity  or  value  over 
the  encumbrance  is  $10,000  while  that  of  the  second  party  is 
$6,000  the  difference  being  $4,000  which  the  second  party 
will  pay.  A  part  of  the  difference  may  be  paid  on  the  signing 
of  the  contract,  but  quite  often  no  payment  is  made  till  the  clos- 
ing of  title. 

Following  the  closing  clause,  which  is  like  a  contract  of  sale, 
is  the  brokerage  statement.  Since  this  is  an  exchange,  there 
may  very  likely  be  a  broker  representing  each  party.  The 
contract  should  contain  the  name  of  each  broker,  the  amount 
of  commission  to  be  paid  him,  and  by  whom  to  be  paid.  Since 
the  values  stated  may  be  and  often  are  inflated  and  the  com- 
mission is  usually  a  certain  percentage  of  the  actual  value,  it 
is  always  wise  to  agree  on  a  definite  amount  of  commission, 
so  that  no  subsequent  claim  of  a  percentage  amount  based  on 
the  value  stated  in  the  contract  be  made  by  the  broker. 

The  remaining  provisions  are  similar  to  the  contract  of  sale 
but  being  worded  to  apply  to  each  party  as  each  is  conveying 
realty. 


CHAPTER  VI 

AUCTION  SALES 

Definition  and  kinds  of  auction  sales. — An  auction  sale  is 
a  public  sale  to  any  person  bidding  the  highest  price,  upon 
terms  and  conditions  previously  announced.  The  sale  de- 
scribed in  the  previous  chapter  was  negotiated  privately,  a 
definite  purchaser  appearing  with  whom  the  seller  dealt  di- 
rectly, knowing  with  whom  he  was  doing  business.  An  auction 
sale  on  the  other  hand  is  public  and  any  person  may  become 
the  purchaser.  The  owner  does  not  even  know,  until  the  bid- 
ding takes  place,  what  price  he  will  receive 'for  his  property. 

Usually  the  seller  can  realize  more  for  his  property  at  priv- 
ate sale.  However  he  may  be  compelled  to  sell  at  auction, 
either  because  the  law  requires  the  sale  of  his  property  pub- 
licly, or  because  private  purchasers  do  not  appear  or  he  thinks 
a  public  sale  would  bring  a  larger  price.  In  the  large  cities 
there  are  customary  auction  rooms  and  licensed  auctioneers 
whose  time  and  energy  is  devoted  to  auction  sales.  In  the 
country  districts  the  sale  is  usually  had  at  some  gathering 
place,  as  the  post  office,  railway  station,  town  hall  or  on  the 
property. 

Auction  sales  are  of  two  kinds — voluntary  and  involuntary, 
each  differing  very  materially  from  the  other. 

Involuntary  auction  sales. — The  involuntary  auction  sale 
is  brought  about  as  the  result  of  the  enforcement  of  some  lien 
upon  the  property.  A  lien,  it  will  be  recalled,  entitles  the 
holder  in  the  event  of  non-payment  to  satisfy  it  from  the  prop- 
erty. The  lien  may  have  originated  in  a  voluntary  act  of  the 
owner,  e.g.  borrowing  on  mortgage,  but  the  lien  once  coming 
into  being  its  enforcement  may  be  secured  entirely  without  the 
owner's  volition.  The  owner  having  defaulted  in  payment, 
the  law  gives  the  lienor  the  right  to  have  the  property  sold. 
From  the  proceeds  of  the  sale,  the  amount  of  the  lien  and  in- 
terest and  all  expenses  are  paid,  and  the  balance  belongs  to  the 
owner.  A  public  auction  sale,  in  theory  of  law,  will  bring  the 
greatest  price,  hence  all  sales  to  enforce  liens  must  be  of  that 
kind.  The  sale  follows  a  legal  action  in  which  the  lienor's 

right  has  been  established. 

65 


66    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

The  sale. — If  the  lien  is  a  judgment  the  sale  is  usually  con- 
ducted by  the  sheriff.  The  other  liens  usually  are  satisfied  by 
a  sale  conducted  by  a  referee  who  is  appointed  by  and  respon- 
sible to  the  court.  Notice  of  the  sale  must  be  given  strictly 
in  accordance  with  law.  Failure  to  comply  with  each  require- 
ment may  result  in  a  sale  which  may  be  set  aside.  The  notice 
is  given  usually  by  advertising  in  the  newspapers  and  in  the 
rural  districts  by  posting  a  copy  of  the  notice  of  sale  in  several 
prominent  places.  The  sheriff  or  referee  may  conduct  the 
sale  himself,  but  usually  in  the  cities  it  is  customary  for  him 
to  engage  an  auctioneer.  The  following  is  an  example  of 
notice  of  sale  following  foreclosure  of  a  mortgage  upon  prop- 
erty in  New  York  City. 


SUPREME  COURT,  COUNTY  OF  NEW  YORK.    John  Jones,  plain- 
tiff, against  William  Smith  et  al.,  defendants. 

In  pursuance  of  a  judgment  of  foreclosure  and  sale,  duly  made  and 
entered  in  the  above  entitled  action,  and  bearing  date  the  4th  day  of 
April,  1921,  I  the  undersigned,  the  referee  in  said  judgment  named,  will 
sell  at  public  auction,  at  the  Exchange  Salesroom,  No.  14-16  Vesey  Street, 
in  the  Borough  of  Manhattan,  City  of  New  York,  on  the  28th  day  of 
April,  1921,  at  12  o'clock  noon  on  that  day,  by  Henry  Brady,  auctioneer, 
the  premises  directed  by  said  judgment  to  be  sold,  and  therein  described 
as  follows: 

All  that  lot  of  land  in  the  Borough  of  Manhattan,  City  of  New  York, 
•with  the  building  thereon  erected,  bounded  and  described  on  the  map 
above  mentioned,  as  follows: 

Beginning  at  a  point  on  the  southerly  side  of  One  Hundred  and  Four- 
teenth Street  distant  one  hundred  and  seventy-five  feet  westerly  from 
the  southwesterly  corner  of  One  Hundred  and  Fourteenth  Street  and 
First  Avenue;  and  running  thence  southerly,  and  parallel  with  First 
Avenue,  one  hundred  feet  ten  inches;  thence  westerly,  and  parallel 
with  One  Hundred  and  Fourteenth  Street,  twenty-five  feet;  thence 
northerly,  and  parallel  with  First  Avenue,  one  hundred  feet  ten  inches 
to  the  southerly  side  of  One  Hundred  and  Fourteenth  Street;  and  thence 
easterly,  along  the  southerly  side  of  One  Hundred  and  Fourteenth 
Street,  twenty-five  feet  to  the  point  or  place  of  beginning. 

Dated  New  York,  April  5,  1921. 

FRANCIS  G.  KEOGH, 

Referee. 

BROWN  &  WHITE, 

Attorneys  for  Plaintiff, 
Office  and  P.  O.  address,  32  Liberty  Street, 

Borough  of  Manhattan,  City  of  New  York. 

In  some  places  it  required  that  the  notice  of  sale  contain  a 
statement  of  the  approximate  amount  of  the  lien  to  satisfy 
which  the  property  is  being  sold. 

Terms  of  sale. — In  any  sale  of  real  property,  there  must 


AUCTION  SALES  67 

be  a  written  contract.  In  a  private  sale  the  contract  is  pre- 
pared and  signed  by  the  parties  after  their  negotiations  have 
led  to  an  agreement.  Upon  a  sale  at  auction  there  is  obvi- 
ously no  negotiation,  the  auctioneer  offering  the  property,  ask- 
ing bids,  and  selling  to  the  highest  bidder.  So  that  the  pros- 
pective bidders  may  know  upon  what  they  are  bidding,  terms 
of  sale  are  prepared  and  read  by  the  auctioneer  before  the 
property  is  offered.  These  terms  of  sale,  usually  prepared  in 
duplicate  constitute  the  contract.  The  following  is  the  usual 
form,  with  the  blanks  filled  in. 


COURT,  COUNTY 


Vrmj  of  Sale. 
J 

The  premises  described  in  the  annexed  advertisement  of  sale,  will  be  sold 

under  the  direction  of Referee,  upon  the  following  terms: 

Dated, 191 

1st- — Ten  per  cent  of  the  purchase  money  of  said  premises  will  be  required  to 

be  paid  to  the  said  Referee,  at  the  time  and  place  of  sale,  and  for  which 

the  referee's  receipt  will  be  given. 
2nd. — The  residue  of  said  purchase  money  will  be  required  to  be  paid  to  the 

said  Referee  at  his  office,  No in  the  Borough  of 

City  of  New  York,  on  or  before  the day  of 191. . . 

at o'clock         M.,  when  the  said  Referee's  deed  will  be  ready  for 

delivery. 

3rd. — The  Referee  is  not  required  to  send  any  notice  to  the  purchaser;  and,  if 
he  neglects  to  call  at  the  time  and  place  above  specified  to  receive  his  deed, 
he  will  be  charged  with  interest  thereafter  on  the  whole  amount  of  his 
purchase,  unless  the  referee  shall  deem  it  proper  to  extend  the  time  for  the 
completion  of  said  purchase. 

4th. — All  taxes,  assessments  and  water  rates  duly  confirmed  and  payable  which, 
at  this  date,  are  liens  or  encumbrances  upon  said  premises,  will  be  allowed 
by  the  Referee  out  of  the  purchase  money,  provided  the  purchaser  shall, 
previous  to  the  delivery  of  the  deed,  produce  to  the  Referee  proof  of  such 
liens,  and  duplicate  receipts  for  the  payment  thereof. 

5th. — The  purchaser  of  said  premises  or  any  portion  thereof,  will,  at  the  time 
and  place  of  sale  sign  a  memorandum  of  his  purchase  and  an  agreement 
to  comply  with  the  terms  and  conditions  of  sale  herein  contained,  and  pay, 
in  addition  to  the  purchase  money,  the  auctioneer's  fee  of  fifteen  dollars  for 
each  parcel  sold  and  salesroom  fee  of  two  dollars  for  each  knockdown. 

6th.— The  biddings  will  be  kept  open  after  the  property  is  struck  down;  and  in 
case  any  purchaser  shall  fail  to  comply  with  any  of  the  above  conditions 
of  sale,  the  premises  so  struck  down  to  him  will  be  again  put  up  for  sale, 
under  the  direction  of  said  Referee,  under  these  same  terms  of  sale,  without 
application  to  the  Court,  unless  the  Plaintiff's  Attorney  shall  elect  to  make 


68    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

such  application;  and  such  purchaser  will  be  held  liable  for  any  deficiency 
there  may  be   between   the  sum   for  which  said   premises   shall   be   struck 
down  upon  the  sale  and  that  for  which  they  may  be  purchased  on  the  re-sale, 
and  also  for  any  costs  or  expenses  occurring  on  such  re-sale. 
7th.- 


Referee. 

MEMORANDUM  OF  SALE 

have  this day  of 191. ..  purchased  the 

premises  described  in  the  above  annexed  printed  advertisement  of  sale,  for  the 

sum  of dollars and  hereby 

promise  and  agree  to  comply  with  the  terms  and  conditions  of  the  sale  of  said 
premises,  as  above  mentioned  and  set  forth. 


Address 

191...       Received  from the  sum  of 

dollars,  being  10  per  cent  on  the  amount  bid 

by for  property  sold  by  me  under  the  order  in  the  cause. 

$ 

After  the  bids  have  been  closed  the  successful  bidder  signs 
the  memorandum  on  one  copy  which  is  kept  by  the  officer  sell- 
ing, who  in  turn  receives  the  deposit  and  after  signing  the 
receipt  gives  one  copy  to  the  purchaser.  Each  party  then  has 
the  signed  obligation  of  the  other,  and  the  subsequent  course 
of  the  transaction  is,  in  the  main,  similar  to  a  private  sale, 
except  as  the  provisions  in  the  terms  of  sale  differ  from  the 
usual  contract  on  a  private  sale. 

Description  of  terms  of  sale. — Following  the  title  of  the 
action  is  the  recital  that  the  property  described  in  the  adver- 
tised notice  (a  copy  of  which  should  be  attached  to  the  terms 
of  sale)  is  being  sold  by  the  referee,  naming  him,  upon  certain 
terms  which  are  then  set  forth.  The  first  clause  provides  for 
payment  of  a  deposit  by  the  purchaser,  usually  not  more  than 
ten  per  cent.  The  second  sets  the  riate,  usually  thirty  days 
after,  and  the  place  of  closing  title,  which  is  often  the  office 
of  the  attorney  for  the  lienor.  The  time  allowed  enables  the 
purchaser  to  examine  the  title.  The  third  and  sixth  clauses 


AUCTION  SALES  69 

prescribe  the  penalty  in  the  event  of  default  by  the  purchaser 
in  taking  title;  the  property  may  be  resold,  and  he  will  be  held 
for  the  expense  of  such  resale  and  any  difference  between  his 
bid  and  the  amount  bid  on  resale.  The  fourth  clause  pro- 
vides for  disposition  of  taxes,  assessments  and  water  rates. 
This  differs  from  a  contract  of  private  sale  in  which  it  is 
provided  that  the  seller  pays  all  such  as  are  due  up  to  the  date 
of  closing  title.  Here  the  referee  is  only  responsible  for  those 
which  accrue  up  to  the  date  of  sale.  He  agrees  either  to  pay 
them  himself,  or  allow  them  if  the  purchaser  pay  them  and 
produce  receipts.  By  the  fifth  clause  the  purchaser  agrees  to 
sign  and  be  bound  by  the  terms  of  sale  and  to  pay  the  auction- 
eer's fee.  This  expense  is  always  borne  by  the  purchaser. 

If  the  property  is  being  sold  subject  to  any  existing  encum- 
brances they  must  be  fully  set  forth  in  the  seventh  clause.  If 
not,  the  purchaser  may  properly  refuse  to  complete  the  sale. 
For  example,  if  a  second  mortgage  were  being  foreclosed,  and 
the  first  mortgage  were  not  recited  as  a  lien  subject  to  which 
the  property  was  being  sold,  the  purchaser  would  be  entirely 
justified  in  claiming  that  he  had  intended  his  bid  to  be  on  a 
free  and  clear  property. 

Fraudulent  bidding. — The  law  prohibits  any  act  by  which 
the  bidding  upon  property  sold  at  involuntary  auction  is  arti- 
ficially limited  or  controlled.  The  property  being  sold  is  that 
of  an  unfortunate  debtor.  As  much  as  possible  must  be  real- 
ized from  it,  so  that  oiot  only  may  the  lien  be  paid,  but  if 
possible  something  remain  for  the  owner.  Full  access  and 
opportunity  to  bid  must  be  given  to  all  prospective  bidders. 
No  bidder  is  required  to  bid  more  for  the  property  than  he 
wishes.  But  the  sale  must  be  conducted  in  the  usual  manner, 
without  undue  haste,  or  failure  to  recognize  any  bidder. 

The  lienor  at  whose  instance  the  property  is  being  sold  ex- 
pects to  be  paid  the  amount  of  his  claim  out  of  the  proceeds 
of  sale;  He  therefore  is  justified  in  bidding  the  property  (if 
it  is  worth  it)  at  least  up  to  an  amount  sufficient  to  satisfy 
his  claim.  There  is  nothing  improper  in  this  even  though  he 
cease  bidding  when  that  amount  has  been  reached.  Nor  is  it 
wrong  for  junior  lienors  to  bid  upon  the  property  in  an  effort 
to  protect  themselves;  or  for  the  owner  to  bid  in  an  effort  to 
have  his  property  bring  as  much  as  possible.  The  mere  fact 
that  the  successful  bidder  secured  the  property  very  cheaply, 
would  not  be  evidence  of  fraud. 


70    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

Voluntary  auction  sales. — A  voluntary  auction  sale  is  the 
free  act  of  the  owner.  He  may  be  unwilling  to  keep  the  prop- 
erty longer,  or  he  may  have  urgent  need  of  money,  and  may 
decide  upon  an  auction  sale  as  a  means  of  disposing  of  the 
property  and  realizing  cash.  But  he  is  not  compelled  to  sell: 
he  does  it  voluntarily.  No  lienor  steps  in  to  compel  the  sale 
of  the  property  by  legal  action.  Hence  a  voluntary  auction 
differs  in  one  very  material  respect  from  an  involuntary  sale; 
there  is  no  sheriff,  referee  or  other  officer  conducting  the  sale, 
though  there  may  be  and  usually  is  an  arrangement  made  for 
an  auctioneer. 

Fiduciaries,  such  as  executors  and  trustees  who  are  directed 
to  sell  for  the  best  price  obtainable,  will  usually  sell  at  auction. 
By  so  doing,  they  are  fully  protected  from  criticism.  They 
may  also  sell  at  auction  when  they  believe  a  higher  price  will 
be  obtained  in  that  way.  In  many  cases  also  an  individual 
under  no  compulsion  may  sell  at  auction  in  the  belief  that  such 
manner  of  disposing  of  his  property  will  realize  most  for  him. 

Protective  bidding. — It  may  be  that  at  the  time  of  sale 
the  owner  is  unwilling  to  have  the  property  sold  for  less  than 
a  certain  sum,  or  if  the  property  is  being  sold  by  an  executor 
to  raise  funds  to  pay  creditors  or  beneficiaries,  they  may  wish 
the  property  to  bring  sufficient  to  satisfy  their  claims.  This 
gives  rise  to  the  question  of  proper  protection.  It  is  not  im- 
proper for  such  creditors  and  beneficiaries  to  have  the  prop- 
erty bid  up  to  cover  them.  The  owner  selling  should  not  bid 
unless  it  has  been  announced  by  the  auctioneer  that  the  prop- 
erty will  be  protected  up  to  a  certain  amount.  The  terms  of 
sale,  for  the  same  purpose,  may  state  that  no  bid  of  less  than 
a  certain  amount  will  be  accepted.  "Boosting"  by  fictitious^ 
bids,  made  by  agents  of  the  owner,  for  the  purpose  of  induc- 
ing higher  bids  by  others  is  wrong  and  may  result  in  the  sale 
being  set  aside  by  a  court.  It  hurts  the  reputation  of  auction 
sales,  discourages  honest  bidders  and  no  wise  auctioneer  will 
permit  it.  If  he  detects  it,  he  should  at  once  withdraw  the 
property  from  the  sale. 

Terms  of  sale. — The  terms  of  sale  in  a  voluntary  auction 
sale  may  contain  any  provisions  which  the  seller  desires.  Of 
course  if  he  makes  them  too  onerous  he  will  get  no  bids,  but 
there  is  no  court  (as  in  an  involuntary  auction)  to  prescribe 
the  terms.  The  terms  of  sale  in  a  voluntary  auction  usually 
are  similar  to  those  in  an  involuntary  auction,  except  in  three 


AUCTION  SALES  71 

particulars.  The  deposit  is  paid  to  the  auctioneer  who  gives 
his  receipt  and  who  holds  it  for  the  parties.  When  the  deed 
is  passed  he  pays  it  to  the  seller  upon  surrender  of  the  receipt 
by  the  purchaser.  Another  difference  is  that  in  a  voluntary 
auction  it  is  usually  provided  that  rents,  interest  on  mortgages 
and  insurance  premiums  be  apportioned  and  that  the  seller 
pay  taxes,  assessments  and  water  rates  due  up  to  the  date  of 
closing  title.  The  third  distinction  is  that  while  in  an  invol- 
untary auction  the  terms  of  sale  are  signed  by  the  referee,  in 
a  voluntary  sale,  there  being  no  referee,  they  are  signed  by  the 
owner,  his  attorney  or  the  auctioneer. 

Successful  auction  sales. — The  object  of  an  auction  sale 
is  to  realize  the  greatest  price.  In  involuntary  sales  often  no 
one  is  interested  except  the  immediate  parties;  the  lienor  is 
seeking  only  to  have  the  property  bring  the  amount  of  his 
lien;  the  owner  is  usually  in  no  position  to  help  himself.  Con- 
sequently the  public  is  not  drawn  to  the  sale  and  there  is  little 
bidding.  Voluntary  sales  seek  the  public  eye.  By  judicious 
advertising  in  the  newspapers  and  wide  distribution  of  posters 
and  booklets  well  written  and  illustrated,  showing  the  attrac- 
tive features  of  the  property,  its  accessibility,  improvements, 
existing  and  proposed,  schools  and  amusement  facilities,  the 
attention  of  the  public  is  attracted.  The  sale  may  be  held  on 
a  holiday,  in  a  tent  on  the  property.  Transportation  and  en- 
tertainment is  often  provided.  Then  the  auctioneer  having 
the  crowd  before  him  lauds  the  property  and  uses  all  his  per- 
suasive power  to  draw  bids.  The  successful  results  of  such 
sales  are  attested  by  the  large  tracts  of  property  sold  advan- 
tageously by  this  method.  The  appendix  contains  numerous 
specimens  of  successful  advertising. 


CHAPTER  VII 

DEEDS 

Purpose  of  deed. — A  deed  is  a  writing  in  proper  and  effi- 
cient words  conveying  absolutely  title  to  or  an  interest  in  realty. 
It  is  the  instrument  by  which  the  transfer  of  title  is  effected. 
Every  contract  of  sale  or  for  exchange,  and  the  terms  of  sale 
in  an  auction  sale  provide  for  the  final  consummation  of  the 
transaction  by  delivery  of  a  deed.  Anciently  ownership  of 
land  was  transferred  symbolically  by  delivery  in  the  presence  of 
witnesses,  by  the  seller  to  the  purchaser  of  a  clod  of  earth  from 
the  land.  For  many  years  and  at  the  present  time  the  transfer 
is  accomplished  by  delivery  of  a  deed  and  surrender  of  posses- 
sion. 

Form  of  deed. — There  are  various  forms  of  deeds  accord- 
ing to  their  purpose  and  objects,  and  differences  will  be  found  in 
those  of  the  several  States.  However  the  simple  form  of  deed 
by  which  title  is  passed  is  substantially  the  same  in  all  States. 
In  New  York  it  is  the  form  known  as  the  "bargain  and  sale 
deed,"  and  its  phraseology  is  prescribed  by  statute  as  follows : 

THIS  INDENTURE,  made  the  day  of  nineteen  hundred  and          , 

between  ,  part       of  the  first  part 

and 

,  part       of  the  second  part, 
WITNESSETH,  that  the  part         of  the  first  part,  in  consideration  of 

Dollars,  lawful  money  of  the  United  States, 

paid  by  the  part        of  the  second  part,  do        hereby  grant  and  release  unto  the 

part         of  the  second  part,  and  assigns  forever, 

ALL 

together  with  the  appurtenances  and  all  the  estate  and  rights  of  the  part        of 

the  first  part  in  and  to  said  premises, 

TO  HAVE  AND  TO  HOLD  the  premises  herein  granted  unto  the  part        of 
the  second  part,  and  assigns  forever 

AND  the  said  covenant    that     he     ha     not 

done  or  suffered  anything  whereby  the  said  premises  have  been  incumbered  in 
any  way  whatever 

IN  WITNESS  WHEREOF,  the  part        of  the  first  part  ha         hereunto  set 
hand         and  seal         the  day  and  year  first  above  written. 

In  presence  of 

(ACKNOWLEDGMENT) 

72 


DEEDS  73 

The  opening  words  are  "This  Indenture."  They  have  no 
significance  now.  The  instrument  would  be  just  as  effectual 
without  them.  They  survive  from  the  ancient  days  when  the 
documents  were  written  in  duplicate  on  the  same  sheet,  then 
torn  apart,  each  party  keeping  a  piece  (indenture).  To  prove 
genuineness  they  were  fitted  together  to  see  if  the  torn  edge  of 
one  fitted  the  other. 

These  words  are  followed  by  the  date.  As  in  contracts  it 
is  not  necessary  that  the  deed  be  dated.  It  is  convenient  as  a 
memorandum  of  the  time  of  signing,  however,  and  in  the  ab- 
sence of  proof  to  the  contrary  is  presumed  to  be  the  date  of 
delivery  of  the  instrument.  For  that  reason  deeds  are  usually 
dated. 

Next  are  set  forth  the  names  of  the  seller  and  the  purchaser 
in  that  order.  Each  name  should  for  identification  be  followed 
by  the  address  of  the  party.  In  New  York  and  some  other 
States  it  is  required  that  the  purchaser's  address  be  designated 
in  detail  as  to  street  and  number.  In  the  deed  under  discussion 
the  seller  is  designated  "party  of  the  first  part"  and  purchaser 
"party  of  the  second  part."  They  are  also  termed  respectively 
"grantor"  and  "grantee."  If  the  seller  is  married  he  must 
give  a  deed  free  of  his  wife's  dower.  She  may  sign  and  de- 
liver a  separate  instrument  releasing  her  dower.  It  is  how- 
ever customary  for  her  to  accomplish  the  same  result  by  joining 
as  a  grantor  in  the  deed.  In  that  case  the  wording  should  read 
''John  Jones  and  Mary  Jones,  his  wife."  Her  name  should 
always  be  followed  by  words  indicating  her  status  as  wife. 
"Witnesseth"  has  no  present-day  meaning  whatever,  and  could 
be  omitted  without  affecting  the  validity  of  the  instrument. 

Consideration. — The  statement  of  the  consideration  (that 
which  is  given  to  the  seller  in  return  for  the  deed),  comes  next. 
There  are  several  classes  of  considerations  and  since  each  may 
differently  affect  the  title  conveyed,  and  the  rights  of  the  pur- 
chaser, an  examination  of  each  is  helpful.  For  general  pur- 
poses considerations  are  divided  into  three  classes:  good, 
valuable  and  illegal.  Good  considerations  and  valuable  con- 
siderations give  to  the  purchaser  very  different  rights  and  must 
therefore  not  be  confused.  A  valuable  consideration  is  the 
giving  by  the  purchaser  at  the  time  of  delivery  of  the  deed  of 
money  or  money's  worth.  It  need  not  be  exactly  equal  to  the 
value  of  the  property  but  should  bear  some  fair  relation  to  the 
property's  value,  and  be  of  some  present  value.  The  usual 


74   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

commercial  sale  of  realty  for  cash,  or  in  exchange  at  a  fair 
price,  exemplifies  a  valuable  consideration.  A  good  considera- 
tion on  the  other  hand  is  one  not  measurable  in  terms  of  money 
or  money's  worth  or  not  passing  at  the  time  of  the  sale.  For 
example :  A  gives  his  son  B  his  farm  by  reason  of  natural  love 
and  affection.  This  consideration  is  not  measurable  in  terms  of 
money.  Or  A,  who  has  been  for  several  years  indebted  to  B 
in  the  sum  of  $5,000  gives  B  a  deed  of  his  farm  upon  B  can- 
celling the  indebtedness.  In  this  instance  the  consideration  is 
not  a  present  transfer  of  value  between  the  parties. 

The  distinction  between  these  two  classes  of  consideration 
will  be  readily  understood  by  bearing  in  mind  the  principle,  that, 
equitably,  a  man  is  trustee  of  his  property  for  the  benefit  of  his 
creditors.  If  he  has  no  debts,  or  will  be  left  even  after  the  con- 
veyance, with  ample  property  to  pay  his  debts,  he  may  give 
away  his  property  or  sell  it  for  any  price  and  no  one  may  ob- 
ject. But  if  he  has  creditors  he  is  not  permitted  even  uninten- 
tionally to  cheat  them  by  disposing  of  his  property  without  sub- 
stituting in  its  place  something  of  value  received  for  it.  A  good 
consideration  is  sufficient  as  between  seller  and  purchaser  to 
support  a  deed,  but  is  in  fraud,  possibly  unintended,  of  creditors 
of  the  seller  and  they  may  be  able  to  set  the  deed  aside.  A  deed 
delivered  for  a  valuable  consideration,  on  the  contrary,  leaving 
in  the  seller's  hands  something  of  value,  is  good  as  against  the 
world.  The  creditors  are  in  just  as  good  a  position  as  before 
the  conveyance :  Simply  one  form  of  asset  has  been  substi- 
tuted for  another.  Courts  are  very  jealous  of  the  rights  of 
creditors;  one  of  them  may  not  secure  an  unfair  preference  over 
the  others.  It  is  for  that  reason  that  the  deed  to  the  creditor 
B  (above)  would  be  set  aside.  He  should  not  receive  any  spe- 
cial advantage.  So  also  if  the  seller  has  debts,  careful  scrutiny 
should  be  given  any  sale  where  the  price  is  far  less  than  the 
property's  value.  A  court  at  the  instance  of  creditors  may  set 
aside  the  deed,  if  convinced  that  the  debtor  has  parted  with 
his  property  for  an  inadequate  consideration. 

An  illegal  consideration  may  be  defined  as  anything  which 
the  law  prohibits.  It  really  is  a  misnomer,  since  being  illegal 
it  is  in  the  eyes  of  the  law  not  a  consideration.  If  the  purchaser, 
for  example,  promise  in  return  for  the  deed  that  he  will  con- 
duct a  saloon  in  the  premises  conveyed,  the  consideration  is 
illegal  and  the  deed  void. 

Expression  of  consideration. — Some  consideration  should 


DEEDS  75 

always  be  stated  in  a  deed.  This  shifts  the  burden  of  proving 
lack  of  consideration  to  anyone  attacking  the  deed.  To  be  sure 
the  seal  at  the  end  of  the  instrument  imports  consideration  and 
performs  the  same  service,  but  it  might  inadvertently  be 
omitted.  The  amount  stated  need  not  be  the  actual  price  paid. 
It  may  be  nominal,  as  "ten  dollars"  or  "one  hundred  dollars." 
This  is  usually  done  whenever  the  parties  desire  secrecy.  There 
is  however  one  important  exception  to  this  rule.  When  the 
seller  is  a  fiduciary,  the  purchaser  should  always  insist  either  on 
the  deed  stating  the  full,  actual  consideration  or  the  seller  giv- 
ing a  declaration  signed  and  acknowledged,  in  form  which  may 
be  recorded,  setting  forth  the  actual  amount  received.  This 
for  the  reason  that  the  fiduciary  is  not  selling  his  own  property 
and  is  bound  therefore  to  sell  only  for  a  fair  price,  and  the  pur- 
chaser might  subsequently  be  called  upon  to  prove  that  fact. 

Granting  clause. — The  words  in  the  form,  following  the 
recital  of  the  consideration,  "do  hereby  grant  and  release  unto 
the  party  of  the  second  part  *  *  *  and  assigns  forever," 
constitute  what  is  known  as  the  granting  clause.  It  is  by  this 
clause  that  the  interest  or  title  is  transferred,  and  care  must  be 
taken  to  see  that  this  clause  is  properly  worded.  If  for  ex- 
ample the  interest  to  be  given  by  the  grantor  to  the  grantee  is 
an  estate  in  fee  simple  the  words  "to  the  party  of  the  second 
part,  his  heirs  or  assigns  forever"  should  be  used,  and  ap- 
propriate words  for  the  other  estates  if  one  of  them  is  to  be 
conveyed.  Any  instrument  under  consideration  is  always  con- 
strued against  its  maker,  and  the  grantor  is  presumed  to  intend 
to  grant  a  fee  simple  estate  unless  he  expressly  limits  it  either 
in  this  clause  or  the  habendum  clause.  This  rule  has  one  excep- 
tion :  as  to  a  grantor  who  has  an  individual  estate  as  well  as  a 
representative  right  to  sell.  As  to  him  it  is  presumed  that  he  in- 
tends to  convey  all  his  individual  right  but  only  sugh  repre- 
sentative rights  as  he  expressly  states. 

Description. — Any  description  which  unquestionably  iden- 
tifies the  property  is  sufficient  for  the  deed.  It  is  not  usual  to 
use  street  number  descriptions,  it  being  desirable  to  identify 
the  property  with  more  particularity.  A  description  by  street 
number  is  appropriate  in  a  contract,  since  the  contract  is  nor- 
mally consummated  within  a  short  time.  A  deed  on  the  other 
hand  remains  a  permanent  record  and  becomes  a  part  of  the 
chain  of  title.  Consequently  the  description  used  should,  if 
possible,  be  one  that  may  be  identified  with  reasonable  ease  many 


76   REAL  ESTATE  PRINCIPLES 'AND  PRACTICES 

years  later.  It  is  for  this  reason  that  street  numbers  which  may 
change  as  buildings  are  altered  or  demolished,  and  monuments 
such  as  fences,  trees  and  stones  which  may  be  removed  are  in- 
advisable. 

The  various  forms  of  descriptions  have  been  fully  discussed 
in  the  chapter  on  contracts.  There  are  however  certain  pre- 
cautions which  should  be  observed  in  drawing  the  description 
for  a  deed.  The  form  of  descriptions  should  never,  except 
upon  expert  advice,  be  changed.  Much  trouble  has  resulted 
from  failure  to  observe  this  rule.  The  seller  should  always  use 
the  same  description  as  that  in  the  deed  by  which  he  took  title. 
If  for  any  reason  a  change  in  the  form  of  description  is  made, 
it  is  best  to  follow  the  description  with  a  statement  that  the 
premises  described  are  the  same  as  those  conveyed  to  the  seller 
by  his  grantor,  naming  him,  by  a  certain  deed,  reciting  its  date 
and  the  date  and  place  of  record.  In  fact,  since  errors  some- 
times occur,  this  statement  is  not  out  of  place  in  any  deed,  and 
being  used,  corrects  any  error  in  the  description,  by  reference 
to  the  former  deed. 

As  said  before  any  description  is  good  which  unquestionably 
identifies  the  property.  If,  however,  the  description  is  so  in- 
definite that  it  is  impossible  to  definitely  fix  the  property 
intended  to  be  conveyed,  the  deed  is  void  for  uncertainty:  As 
for  example  a  deed  conveying  "any  one  of  ten  lots."  It  cannot 
be  told  what  lot  is  intended  to  be  conveyed.  No  amount  of  ex- 
planation would  point  to  any  one  particular  lot  as  the  one  in- 
tended. 

An  ambiguity  in  the  description  will  not  of  necessity  make 
the  deed  void.  Ambiguities  may  be  patent  or  latent.  If 
patent,  that  is,  if  the  ambiguity  appears  upon  the  face  of  the 
instrument,  resort  may  be  had  to  evidence  outside  the  instru- 
ment to  discover  what  was  the  intent  of  the  parties.  For  in- 
stance the  description  may  be  of  "the  most  easterly  two  of  my 
lots  on  the  south  side  of  X  street."  This  description  as  it  reads 
is  very  ambiguous,  yet  it  is  easily  ascertainable  by  an  examina- 
tion of  the  public  records  just  where  the  grantor's  lots  are  and 
which  are  the  most  easterly  two.  The  patent  ambiguity  may  be 
caused  by  an  inconsistency  in  the  elements  of  the  description. 
Such  would  be  a  description  by  metes  and  bounds  of  a  house  on 
X  street  followed  by  a  recital  that  it  is  the  property  known  as 
125  Y  street.  Here  is  a  clear  inconsistency  yet  the  ambiguity 
appears  on  the  face  of  the  deed  and  the  deed  is  good,  if  ex- 


DEEDS  77 

planatory  evidence,  indicating  the  property  intended,  can  be 
procured.  As  to  latent  ambiguities  the  rule  is  quite  different. 
These  are  such  as  do  not  appear  upon  the  face  of  the  instru- 
ment; the  description  being  apparently  definite  and  clear.  The 
parties  may  have  intended  to  transfer  X,  but  by  error  a  de- 
scription of  Y  was  put  in  the  deed.  The  deed  on  its  face  shows 
no  ambiguity  whatever.  Such  a  deed  may  be  reformed  by  an 
action  brought  to  correct  it  or  the  grantee  may  compel  the 
grantor  to  give  a  correct  deed.  However  it  must  be  borne  in 
mind  that  those  who  come  after  are  entitled  to  rely  upon  in- 
struments which  have  been  recorded.  If  the  deed  is  ambiguous 
on  its  face,  anyone  examining  the  records  becomes  aware  of 
it,  and  can  guard  against  it.  But  if  the  deed  appears  clear 
the  public  is  entitled  to  rely  on  it,  even  though  it  may  be  quite 
contrary  to  the  intentions  of  the  parties  to  it.  Consequently  if 
anyone  has  acted  in  reliance  upon  such  a  deed,  and  would  be 
put  to  a  loss  by  the  parties  changing  or  explaining  it,  the  deed 
must  stand  without  change  or  explanation  of  any  kind. 

Appurtenances. — Following  the  description  is  a  recital 
"With  the  appurtenances  and  all  the  estate  and  rights  of  the 
party  of  the  first  part  in  and  to  said  premises."  By  appurten- 
ances is  meant  all  those  rights  which  go  with  the  land  although 
not  within  the  area  described.  The  easement  to  keep  a  wall 
standing  on  the  next  lot;  a  right  of  way  to  the  highway;  spring 
and  drainage  rights,  are  examples  of  appurtenances.  The 
right  to  the  appurtenances  go  with  the  property  by  law  so  that 
there  is  really  no  need  of  this  clause  in  the  deed. 

Habendum. — The  next  clause,  the  habendum,  commencing 
"To  have  and  to  hold,"  etc.,  describes  the  estate  granted  to  the 
grantee.  It  should  be  consistent  with  the  granting  clause.  Any 
variation  in  the  statement  of  the  estate  granted  in  this  and  the 
granting  clause  is  dangerous.  This  clause  may  define  or  ex- 
plain the  estate  granted  but  cannot  cut  it  down.  If  the  es- 
tate to  be  conveyed  be  less  than  a  fee  simple  it  must  be  here 
stated  and  clearly  described.  For  example:  If  a  life  estate, 
appropriate  words  should  be  used  as  "To  have  and  to  hold  the 
above  granted  premises  unto  the  said  party  of  the  second  j^art 
for  and  during  the  term  of  his  natural  life." 

It  is  usual  if  the  property  is  being  sold  subject  to  encum- 
brances to  set  them  forth  following  this  clause.  This  applies 
usually  to  mortgages,  rights  of  tenants  and  restrictions.  The 
grantor  is  assumed  to  be  conveying  free  and  clear  of  all  en- 


78    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

cumbrances  except  those  specifically  mentioned.  Hence  a 
careful  enumeration  should  be  made  of  each  encumbrance  pre- 
ceded by  the  words  "subject  to"  as,  for  example,  "subject  to  a 
mortgage  now  a  lien  on  said  premises  to  secure  the  payment  of 
$10,000; — to  the  rights  of  present  tenants  as  monthly  ten- 
ants and  to  all  covenants  and  restrictions  of  record." 

Often,  particularly  when  an  owner  of  a  large  plot  is  selling 
vacant  lots  for  building  purposes,  he  wants  to  restrict  them  for 
the  benefit  of  the  entire  plot.  He  may  believe  that  the  property 
will  be  more  valuable  if  houses  of  only  certain  types  are  erected. 
This  purpose  is  usually  accomplished  by  means  of  "restrictive 
covenants"  which  are  inserted  in  the  deed  at  this  place.  Exam- 
ples of  such  covenants  will  be  found  in  the  appendix. 

Testimony  clause. — In  the  deed  now  under  discussion,  the 
"bargain  and  sale"  form,  the  final  provision  beginning  with 
the  words  "In  witness  whereof,"  etc.,  is  the  testimony  clause. 
This  paragraph  is  a  purely  formal  recitation  of  the  fact  that 
the  grantor  has  signed  and  sealed  the  deed.  It  might  be  just 
as  well  left  out  so  long  as  the  signing  is  actually  done. 

Signature. — The  deed  must  be  signed  by  the  party  trans- 
ferring the  title.  If  he  be  married  his  wife  being  also  a  grantor, 
must  if  she  has  not  otherwise  released  her  dower,  sign  also. 
They  do  this,  as  in  executing  the  contract,  usually  by  affixing 
their  signatures,  or  marks  if  they  cannot  write  their  names. 
If  a  mark  is  used,  it  is  customary  for  it  to  be  a  cross  and  for 
someone  present  to  write  the  grantor's  name  as  an  identification 
around  the  cross,  thus : 

his 

John  (x)  Brown 
mark 

A  corporation  not  having  hands  or  any  physical  person  must 
act  through  designated  agencies, — its  officers.  They  have 
such  powers  as  are  given  them  by  the  governing  body  of  the 
corporation — its  board  of  directors  or  trustees  if  a  business 
corporation.  The  different  municipal  corporations,  including 
cities,  villages,  towns,  and  school  districts,  have  governing 
boards  under  various  names  each  of  which  authorizes  execu- 
tion by  some  proper  official.  A  corporation  executes  an  instru- 
ment by  affixing  its  seal.  The  form  of  this  corporate  seal  is 
usually  definitely  fixed,  the  corporation  always  using  the  same 
form.  Business  corporations  generally  adopt  a  form  consisting 
of  two  concentric  circles  having  the  corporate  name  between 


DEEDS  79 

them  and  the  name  of  the  State  in  which  incorporated  and  oc- 
casionally the  year  of  organization. 

It  is  customary  for  the  officer  directed  to  execute  the  instru- 
ment, to  sign  the  name  of  the  corporation  and  his  own  name 
adding  the  title  of  his  office.  Often  another  officer  will  sign 
in  attestation.  But  the  important  thing  is  the  corporate  seal, 
which  is  affixed  by  the  authorized  officer,  either  by  impressing 
the  seal  upon  the  instrument  itself  or  upon  a  wafer  which  is 
then  pasted  on  the  instrument. 

Seal. — In  many  States  it  is  necessary  for  an  individual 
grantor  to  seal  his  deed.  This  may  be  done  by  pasting  a  wafer 
of  paper  after  the  signature  or  by  indicating  the  place  of  seal 
by  means  of  a  sign  or  otherwise.  A  seal  is  not  necessary  in 
New  York;  the  deed  is  valid  without  it.  However  most  deeds 
in  New  York  are  sealed  for  the  reason  that  if  under  seal 
the  grantee's  right  of  action  for  breach  of  any  covenant  lasts 
longer. 

Witness. — No  witness  is  necessary.  Usually  however  some 
one  present  at  the  time  signs  his  name  as  such.  A  witness  is 
convenient  only  as  evidence  of  the  signing,  or  to  prove  the 
execution  in  event  the  signor  fails  to  acknowledge  his  execution 
of  the  deed. 

Acknowledgment. — In  some  States  a  deed  cannot  be  re- 
corded unless  the  signor  acknowledges  his  signature  or  the 
signature  is  proven  by  a  witness.  The  manner  of  acknowledg- 
ment by  an  individual  is  explained  fully  in  the  chapter  on  con- 
tracts (page  59).  A  corporation  cannot,  of  course,  acknowl- 
edge its  signature.  Yet  the  seal  must  be  proven.  This  is  done 
by  the  officer  who  affixed  the  seal.  He  is  sworn  by  an  officer 
authorized  to  take  acknowledgments,  and  on  oath  states  his 
residence,  his  official  title  in  the  corporation,  that  he  affixed  the 
seal,  that  the  seal  affixed  is  the  corporate  seal  and  that  he  acted 
by  order  of  the  governing  board  of  the  corporation.  The  of- 
ficer taking  the  acknowledgment  then  certifies  these  facts  on 
the  deed  and  signs  it  stating  his  title.  (Appendix  form  16). 

Quit  claim  deed. — The  Bargain  and  Sale  deed,  which  has 
been  discussed,  transfers  full  title  to  the  property.  It  is  used 
for  the  purpose  of  consummating  a  sale,  particularly  where  the 
grantor  is  unwilling  to  make  any  covenants  as  to  possession  and 
title  in  the  future.  Often  a  person  does  not  own  the  property 
but  merely  some  small  interest  or  claim,  real  or  fancied.  Should 
it  be  desired  to  transfer  this,  the  quit  claim  deed  is  used.  It  is 


80    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

similar  in  wording  to  the  bargain  and  sale  deed  except  that 
the  granting  clause  uses  the  words  "remise,  release  and  quit- 
claim" instead  of  "grant  and  release."  Under  this  form  of 
deed  the  grantor  is  not  held  to  be  undertaking  to  give  any  title, 
he  merely  surrenders  whatever  claim  he  may  have. 

Bargain  and  sale  deed  with  covenants. — Of  course  every 
purchaser  of  property  should,  and  usually  does  make  an  exam- 
ination of  the  records  to  ascertain  whether  the  seller's  title  is 
good.  The  records  may  show  a  good  title  in  the  seller,  yet 
there  may  be  many  flaws  which  the  records  do  not  indicate.  A 
deed  from  A,  B  and  C,  in  the  prior  chain  of  title  may  state  that 
they  are  the  only  children  of  a  former  owner ;  there  may  be  other 
children  who  have  a  right.  There  are  many  other  possible  de- 
fects in  the  title  undiscoverable  from  an  examination  of  the 
records,  but  which  may  come  to  light  after  the  purchaser  has 
taken  title.  To  guard  against  loss  in  such  contingency,  it  is 
customary  to  stipulate  in  the  contract  of  sale  that  the  grantor 
give  a  deed  containing  certain  covenants  and  warranties  re- 
specting the  property. 

Covenant  against  grantor's  acts. — Grantors  who  are  fidu- 
ciaries, such  as  executors  and  trustees,  have  no  interest  in  the 
property  or  the  proceeds  of  its  sale  except  as  representatives  of 
others.  They  do  not  wish  to  assume  any  future  obligations. 
Hence  they  customarily  are  willing  to  covenant  only  that  they 
"have  not  done  or  suffered  anything  whereby  the  said  premises 
have  been  incumbered  in  any  way  whatever."  This  is  known 
as  the  covenant  against  grantor's  acts  and  as  it  states,  is  merely 
a  declaration  that  the  grantor  has  himself  done  nothing  to  harm 
the  title.  This  covenant,  if  broken  by  the  grantor,  is  considered 
to  be  broken  at  the  time  of  delivery  of  the  deed,  not  at  any  later 
time,  or  as  is  said,  it  does  not  run  with  the  land.  No  subse- 
quent purchaser  of  the  land  benefits  by  it,  except  in  so  far  as  the 
time  to  sue  for  its  breach  is  usually  20  years  and  the  subsequent 
purchaser  may  become  entitled  to  sue  on  the  covenant  by  rea- 
son of  assignment  in  later  deeds.  His  only  right  is  however  by 
reason  of  the  cause  of  action  for  breach  being  assigned  to  him ; 
he  has  no  rights  under  the  covenant  itself. 
/  Full  covenant  and  warranty  deed. — The  usual  form  of  con- 
tract of  sale  where  the  seller  is  acting  for  himself  provides  that 
/the  seller  shall  give  a  deed  containing  the  full  covenants  and 
I  warranties.  These  give  the  purchaser  every  possible  future 
guarantee.  In  New  York  State  they  are  five  in  number.  They 


DEEDS  81 

are  inserted  in  the  deed  between  the  habendum  and  testimony 
clauses  and  in  order  are  known  as  the  covenants  of 

1.  Seizin. 

2.  Quiet  enjoyment. 

3.  Encumbrance. 

4.  Further  assurance. 

5.  Warranty. 

The  purpose  of  these  covenants  is  to  create  a  continuing  fu- 
ture obligation  upon  the  grantor.  As  to  all  or  any  of  them 
the  purchaser  may  know  of  a  breach  at  the  time  he  takes  title, 
yet  his  rights  are  not  affected.  It  will  be  noted  that  the  cove- 
nants naturally  divide  into  two  classes:  the  first  and  third 
covenants  relate  to  the  past;  the  second,  fourth  and  fifth  to 
the  future.  Those  which  relate  to  the  past  do  not  run  with 
the  land ;  the  others  do. 

Seizin. — "That  the  said  (grantor)  is  seized  of  the  said 
premises  and  has  good  right  to  convey  the  same."  Under  this 
covenant  the  grantor  guarantees  that  he  owns  and  is  in  posses- 
sion of  the  property  and  that  he  has  good  right  to  sell  it.  This 
covenant  relates  to  the  time  of  the  transfer  and  naturally  if 
broken  at  all,  is  broken  at  the  time  of  delivery  of  the  deed. 
Any  right  of  action  under  it  commences  to  run  from  that  time. 
The  purchaser  may  recover  from  the  seller,  in  case  of  breach  of 
this  covenant,  whatever  his  expense  may  be  up  to  the  amount  he 
paid  for  the  property. 

Encumbrance. — "That  the  said  premises  are  free  from  en- 
cumbrances." Since  this  covenant  guarantees  against  encum- 
brances, it  is  most  important  that  any  encumbrance,  subject  to 
which  the  property  is  sold,  be  stated  in  the  deed.  This  may  be 
done  at  any  place,  usually  after  the  description,  habendum 
clause  or  following  this  covenant.  If  this  covenant  be  broken 
the  purchaser  may  recover  from  the  seller  his  expense  in  pay- 
ing off  any  encumbrance  which  may  have  been  a  lien  when  he 
bought  the  property.  Like  seizin  this  covenant  limits  any  re- 
covery to  the  price  paid  and  is  broken  if  at  all  at  the  time  of 
delivery  of  the  deed. 

Each  of  the  remaining  three  covenants  bind  the  seller  to  fu- 
ture obligations.  No  right  of  action  may  be  in  existence  at  the 
time  of  the  sale,  so  the  covenant  itself  and  not  the  cause  of 
action,  runs  with  the  land. 

Quiet  enjoyment. — uThat  the  party  of  the  second  part  shall 
quietly  enjoy  the  said  premises."  By  this  covenant  the  seller 


82    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

guarantees  that  the  purchaser  shall  not  be  disturbed  in  his 
possession  of  the  property.  It  relates  to  possession  and  not  to 
the  title.  To  make  the  seller  liable  for  a  breach,  it  is  necessary 
to  show  that  the  purchaser  has  actually  been  dispossessed. 
Mere  threats  and  claims  of  outsiders  of  some  rights  in  the 
property  do  not  constitute  a  breach  of  this  covenant. 

Further  assurance. — "That  the  party  of  the  first  part  will 
execute  or  procure  any  further  necessary  assurance  of  the  title 
to  said  premises."  The  seller  undertakes  to  procure  and  de- 
liver any  instrument  other  than  the  deed  which  subsequent 
events  show  to  be  requisite  to  make  good  the  title. 

Warranty. — "That  said  (grantor)  will  forever  warrant  the 
title  to  said  premises."  This  covenant  is  an  absolute  guar- 
[  antee  by  the  seller  to  the  purchaser  of  title  and  possession  of 
the  premises.  It  is  the  most  important  of  the  covenants.  If 
broken,  the  purchaser  may  recover  his  damages  up  to  the  value 
of  the  property  at  the  time  of  sale. 

Effect  of  covenants. — The  five  covenants  discussed  do  not 
by  any  means  guarantee  a  marketable  title  to  the  purchaser. 
The  purchaser  may  have  much  actual  trouble  with  his  title  and 
possession,  yet  no  covenant  be  broken.  There  may,  as  said,  be 
some  person  or  persons  making  claims  to  rights  in  the  property. 
If  however  the  purchaser  is  not  actually  put  out  of  possession 
he  has,  in  New  York  and  many  other  States,  no  redress;  neither 
the  covenant  of  warranty  nor  that  against  encumbrances  has 
been  broken.  There  are  many  technical  defects  which  may 
exist  in  a  claim  of  title  or  possession  not  sufficient  to  permit  of 
ousting  the  purchaser,  nor  of  constituting  a  breach  of  any 
covenant,  but  which  nevertheless  are  a  cloud  on  the  title. 
Under  such  circumstances  the  purchaser  has  what  is  known  as 
a  "good"  title;  no  one  can  take  away  his  possession;  but  he 
has  not  a  "marketable"  title;  he  could  not  compel  a  purchaser 
to  take  it. 


CHAPTER  VIII 

BONDS  AND  MORTGAGES 

Purpose  of  bonds  and  mortgages. — When  real  property  is 
transferred  absolutely,  the  transaction  is  effected  by  delivery 
of  a  deed.  Since  very  early  times  it  has  been  customary  for 
owners  of  realty  to  borrow  money,  pledging  their  property 
for  its  repayment.  A  loan  upon  a  promissory  note  may  be 
good  when  made,  yet  the  borrower  may  become  bankrupt  and 
the  note  when  due  have  no  value.  Even  a  loan  secured  by  a 
pledge  of  personal  property  is  uncertain  for  it,  unlike  realty,  has 
no  permanent  place;  it  may  be  moved  away,  disappear  or  be 
concealed.  Loans  upon  security  of  land,  being  so  much  better 
secured,  have  always  been  in  favor  and  a  large  part  of  the 
realty,  particularly  in  cities,  is  covered  by  mortgages  as  security 
for  loans.  The  amount  loaned  should,  of  course,  bear  a  fair 
relation  to  the  value  of  the  property,  but  since  this  question  is 
more  fully  discussed  in  a  later  chapter,  it  is  not  dwelt  upon  here. 

The  bond  and  mortgage  are  the  two  instruments  by  which 
a  loan  on  realty  is  secured.  The  bond  is  the  evidence  of  in- 
debtedness and  the  promise  to  repay;  the  mortgage  a  pledge  of 
specific  realty  as  security. 

Form  of  bond. — In  several  States  a  note  is  given  by  the  bor- 
rower as  evidence  of  the  debt;  in  some  even  the  interest  amounts 
are  represented  by  a  series  of  notes  given  when  the  loan  is  made 
and  maturing  on  the  interest  dates.  Most  States,  however,  use 
a  bond  substantially  similar  in  form  to  that  of  New  York. 
In  New  York  two  forms  of  bond  are  found,  but  that  used  by  the 
title  companies  is  more  desirable.  Its  form  follows: 

KNOW  ALL  MEN  BY  THESE  PRESENTS, 
That 

hereinafter  designated  as  the  obligor     ,  do          hereby  acknowledge  to  be 

indebted  to 

hereinafter  designated  as  the  obligee,  in  the  sum  of 

dollars,  lawful  money  of  the  United  States,  which  sum  said  obligor 

do     hereby  covenant  to  pay   to  said  obligee, 

or  assigns,  on  the  day  of  nineteen  hundred  and  , 

with  interest  thereon,  to  be  computed  from  the  day  of  ,  19       ,  at 

the  rate  of  per  centum  per  annum,  and  to  be  paid  on  the 

day  of          next  ensuing  the  date  hereof,  and  semi-annually  thereafter. 

83 


84    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

AND  IT  IS  HEREBY  EXPRESSLY  AGREED  THAT  the  whole  of  the  said 
principal  sum  shall  become  due  at  the  option  of  said  obligee  after  default  in 
the  payment  of  interest  for  thirty  days,  or  after  default  in  the  payment  of  any 
tax  or  assessment  for  thirty  days  after  notice  and  demand.  All  of  the  covenants 
and  agreements  made  by  the  said  obligor  in  the  mortgage  covering  premises 
therein  described  and  collateral  hereto,  are  hereby  made  part  of  this  instrument. 

Signed  and  sealed  this  day  of  ,  19 

IN  THE   PRESENCE  OF 

An  examination  of  the  form  reveals  that  the  bond  consists  of 
three  divisions:  1.  An  acknowledgment  of  indebtedness,  2. 
A  promise  to  pay,  and  3.  Provisions  for  default.  The  opening 
words,  "Know  all  men  by  these  presents,"  have  no  meaning. 
They  are  surplussage  and  the  bond  would  be  just  as  valid  with- 
out them.  They  are  merely  a  survival  of  ancient  usage. 

Acknowledgment  of  indebtedness. — Next  appears  the  ac- 
knowledgment of  indebtedness.  The  borrower's  name  is 
inserted.  It  is  not  necessary  to  add  after  his  name  his  place 
of  residence.  That  is  often  done  however  for  identification. 
The  borrower  is  designated  as  the  obligor;  he  gives  his  obliga- 
tion. He  acknowledges  himself  indebted  to  the  lender,  known 
as  the  obligee;  the  person  who  receives  the  obligation.  Often 
there  are  several  borrowers.  Bearing  in  mind  that  the  lender 
wants  the  fullest  security,  it  is  customary  in  such  event  to  insert 
the  words  "jointly  and  severally"  following  the  names  of  the 
borrowers.  By  such  an  obligation  the  lender  may  collect  from 
any  one  or  all  of  the  borrowers.  Each  of  them  makes  himself 
liable  to  pay  the  entire  indebtedness.  Of  course  they  may  have 
any  arrangement  they  wish  between  themselves  for  contribu- 
tion, but  no  burden  is  placed  on  the  lender  to  collect  proportion- 
ately from  them. 

Following  the  designation  of  the  obligee  is  stated  the  amount 

of  the  indebtedness ;  " dollars, 

lawful  money  of  the  United  States."  That  is  the  usual  form, 
and  calls  for  any  sort  of  legal  tender  of  the  United  States;  gold, 
United  States  notes,  silver  dollars  and  fractional  currency  in 
limited  amounts.  Bank  notes,  silver  and  gold  certificates  and 
certificates  of  deposit  are  not  legal  tender.  In  many  countries 
the  national  paper  money  is  worth  less  than  its  face  value. 
While  this  is  not  so  in  the  United  States,  nevertheless  many 
foreign  lenders  desire  that  the  borrower  obligate  himself  to 
pay  "in  gold  coin  of  the  United  States  of  the  present  weight 
and  fineness."  A  bond  containing  such  a  form  of  obligation 
is  known  as  a  gold  bond.  Upon  payment  of  such  a  bond  the 


BONDS  AND  MORTGAGES  85 

lender  may  accept  payment  in  paper  money,  but  should  it  be 
depreciated,  he  need  not  take  it;  he  may  insist  on  payment  in 
gold. 

Promise  to  pay. — The  preceding  language  has  been  entirely 
a  recital  of  indebtedness.  Now  the  obligor  states  the  terms  of 
his  promise  to  pay:  "Which  sum  said  obligor  does  hereby 
covenant  to  pay."  If  more  than  one  bor- 
rower, "jointly  and  severally"  should  be  inserted  in  the  blank 
space.  The  promise  is  made  to  the  obligee,  and  since  the  bond 
is  personal  property,  to  the  executors,  administrators  or  as- 
signs of  the  obligee,  if  an  individual;  or  its  successor  and 
assigns  if  a  corporation.  Next  is  set  forth  the  date  on  which 

the  principal  shall  be  payable,  "on  the day  of 

nineteen  hundred  twenty "by  filling  in  the  blank  spaces. 

Under  these  terms  the  borrower  cannot  pay  the  bond  until  the 
due  date.  If  the  lender  is  willing  to  give  the  borrower  the 
option  to  pay  sooner,  this  provision  may  be  made  to  read  "on 

or  before  the day."  etc.     Usually  however  the  lender  is 

unwilling  to  give  such  an  option;  he  wants  to  know  that  his 
money  is  invested  for  the  full  period  and  that  he  will  not  sud- 
denly have  his  money  returned,  compelling  him  to  seek  another 
investment.  For  this  reason,  even  if  the  lender  is  willing  to 
grant  the  option,  it  is  customary  to  provide  in  the  bond,  either 
that  notice  of  such  intention  be  given  a  certain  length  of  time 
in  advance  of  the  payment,  or  that  the  borrower  when  making 
the  payment  shall  pay  additional  interest  for  a  certain  period 
of  time.  In  this  way  the  lender  has  opportunity  in  the  first 
case  to  seek  a  new  investment  and  be  ready  to  place  his  money 
as  soon  as  he  receives  it,  or  in  the  second  case,  he  receives  in- 
terest to  cover  the  time  the  money  may  be  idle  in  his  hands  until 
another  investment  is  found. 

Following  the  due  date  appears  the  interest  clause:  "with 

interest    thereon,    to    be    computed    from    the day    of 

.« 192.  .,   at  the  rate  of    per  centum 

per    annum,    and    to    be    paid    on    the     day    of 

next  ensuing  the  date  hereof,   and  semi-annually 

thereafter."  The  appropriate  dates  should  be  inserted  in  the 
blank  spaces.  The  date  of  the  bond  is  the  date  from  which 
interest  is  usually  computed.  The  interest  is  not  paid  in  ad- 
vance; no  interest  is  paid  when  the  loan  is  made.  Interest 
may  be  payable  at  any  agreed  interval,  monthly,  quarterly, 
semi-annually  or  annually.  Most  often  it  is  made  payable 


86   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

semi-annually,  and  usually  accords  with  the  date  of  the  bond : 
for  example,  if  the  bond  be  dated  February  12th,  1921,  the 
interest  would  become  payable  August  12th  next  ensuing,  etc. 
This  is  not  a  fixed  rule.  Many  investors,  particularly  banks, 
desire  interest  payments  to  come  in  on  certain  dates  and  to 
that  end  will  have  their  bonds  provide  that  the  first  interest 
payment  be  due  on  the  first  of  their  interest  dates  following 
the  making  of  the  loan,  and  semi-annually  thereafter.  The 
rate  of  interest  is  agreed  upon  between  the  borrower  and  lender 
and  inserted  in  this  clause. 

While  a  definite  date  is  fixed  for  repayment  of  the  amount 
loaned,  very  few  mortgage  loans  are  paid  when  due.  Unless 
the  property  has  depreciated  in  value  the  loan  is  usually  al- 
lowed to  remain.  Banks,  particularly,  generally  permit  their 
loans  to  run  on  indefinitely,  notifying  the  owner  from  time  to 
time  of  any  change  they  may  wish  to  make  in  the  interest  rate. 
Often  the  date  of  payment  is  extended  by  a  formal  instrument, 
known  as  an  "extension  agreement,"  which  designates  a  new 
date  of  payment  in  the  future  and  m*ay  make  any  agreed 
changes  in  the  interest  rate  or  other  terms  of  the  bond. 

Many  bond  forms  leave  the  entire  interest  clause  blank. 
When  using  such  a  form  care  must  be  taken  to  incorporate  all 
the  requisites:  due  date  of  principal,  date  from  which  interest 
runs,  its  rate,  and  dates  of  payment.  Care  should  be  had  also 
not  to  use  a  form  of  interest  clause  providing  for  payment  of 
interest  at  a  specified  rate  "until  the  full  amount  of  principal  and 
interest  is  paid."  Such  a  clause  prevents  the  lender  from  in- 
creasing the  interest  rate,  even  after  the  due  date,  except  by 
express  agreement.  The  form  of  bond  set  out  heretofore 
permits  the  lender  to  raise  the  interest  rate  to  the  legal  maxi- 
mum, as  a  penalty,  as  soon  as  the  date  of  payment  of  principal 
passes. 

Repayment  in  instalments. — Bonds  such  as  have  been  dis- 
cussed, by  their  terms  make  the  principal  payable  in  its  entirety 
at  a  specified  time.  It  may  be  agreed  that  the  principal  shall 
be  payable  in  instalment  at  designated  intervals.  The  follow- 
ing is  a  satisfactory  form  of  clause  for  this  purpose. 

In  instalments  as  follows:  $          on  the  day  of  192     ,  and  a 

like  sum  quarterly  thereafter  on  the  days  of  ,  and 

in  each  year  until  the  full  amount  of  principal  is  paid, 
together  with  interest  thereon  from  the  date  hereof  at  the  rate  of  six 
per  centum  per  annum,  payable  quarterly,  with  each  instalment  of 
principal. 


BONDS  AND  MORTGAGES  87 

Simple  changes  in  the  wording  will  permit  of  the  use  of  this 
form  for  monthly  instalments  or  semi-annual  instalments.  It 
is  usual  for  facility  in  bookkeeping  to  provide  for  interest  pay- 
ments at  the  same  time  that  each  instalment  of  principal  be- 
comes due,  but  this  is  not  necessary.  Interest  may  be  made 
payable  at  any  intervals  stipulated.  If  the  borrower  desires  the 
option  of  paying  more  than  the  fixed  instalment  on  any  due 
date,  this  may  be  provided  for  by  inserting  the  words  "or 
more"  following  the  amount  of  the  agreed  instalment.  The 
lender  however  does  not  wish  to  receive  some  odd  amount  of 
payment,  although  he  is  willing  to  permit  the  borrower  to  in- 
crease his  payment.  He  therefore  should  have  it  provided  that 
the  extra  payment  be  a  certain  amount  or  a  multiple  thereof, 
as  $500  or  $1,000,  $1,500,  $2,000,  etc.  The  borrower  on  his 
part  may  have  agreed  to  pay  instalments  of  $500  or  more  in 
the  amount  of  $250  or  a  multiple  thereof.  Suppose  he  pays 
$1,000  on  a  certain  due  date;  if  no  other  provision  be  inserted 
in  the  bond  he  is  bound  to  pay  the  usual  instalment  on  the  next 
due  date.  He  may  not  be  able  to  do  so  and  so  become  in  de- 
fault, although  he  had  really  paid  the  instalment  in  advance. 
He  may  guard  against  this  situation  by  having  it  stipulated  in 
the  bond  that  extra  payments  are  made  "in  anticipation."  The 

clause  should  then  read  substantially  " dollars 

or  more,  in  the  amount  of dollars  or  a 

multiple  thereof,  in  anticipation,  on  the day  of"  etc. 

Default  clause. — The  property  pledged  as  security  might 
be  sufficient  at  the  time  the  loan  is  made,  yet  if  a  large  amount 
of  unpaid  interest  accumulated,  the  security  might  not  be  great 
enough  to  cover  both  principal  and  interest.  So  likewise  the 
owner  might  permit  taxes  and  assessments  to  go  unpaid.  These 
liens  are  ahead  of  the  mortgage  and  would  consequently  de- 
preciate the  security.  To  prevent  the  happening  of  these  con- 
tingencies the  default  clause  is  inserted  in  the  bond.  Under 
the  terms  of  this  clause  the  total  amount  of  the  bond  becomes 
immediately  due  if  the  interest  is  not  paid  within  thirty  days 
after  it  becomes  due,  or  taxes  or  assessments  remain  unpaid  for 
thirty  days  after  they  become  due.  If  the  principal  of  the  loan 
be  payable  in  instalments  this  clause  should  provide  for  de- 
fault in  such  payments.  This  clause  protects  the  lender,  who 
can  thereby  check  within  a  short  period  any  wastage  of  his  se- 
curity. Should  any  default  occur,  he  can  foreclose  on  the 
property  at  the  end  of  the  stated  grace  period. 


88    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

The  mortgage  given  with  the  bond  contains,  in  addition  to 
the  default  clause,  many  other  provisions  for  the  protection  of 
the  lender  and  these  are  incorporated  into  the  bond  under  the 
last  sentence  in  the  bond  which  begins  uall  of  the  covenants'* 
etc.  Occasionally  the  insurance  clause  is  inserted  in  the  bond, 
by  the  terms  of  which  the  borrower  agrees  to  keep  the  property 
insured  against  fire  for  the  benefit  of  the  lender.  The  property 
is  security  for  the  loan.  If  it  burned  down  the  security  would 
lose  most  of  its  value.  Fire  insurance  protects  against  this 
contingency.  Should  there  be  a  fire  loss  the  insurance  is  pay- 
able to  the  lender  to  the  extent  of  his  loan  and  interest. 

Execution  of  bond. — The  bond  should  be  executed  in  the 
same  manner  as  a  deed.  It  must  be  signed.  It  need  not  be  wit- 
nessed nor  acknowledged  since  it  is  not  usually  recorded.  The 
better  practice  however  is  to  have  the  signature  both  witnessed 
and  acknowledged.  It  should  be  sealed,  although  not  essen- 
tial, as  the  time  limitation  within  which  suit  can  be  brought 
upon  a  sealed  instrument  is  longer  than  upon  one  not  under 
seal. 

Enforcement  of  bond. — Customarily  if  the  loan  or  inter- 
est or  taxes  be  not  paid,  the  lender  seeks  relief  by  foreclosing 
the  mortgage  upon  the  land,  as  in  this  action  he  can  not  only 
enforce  the  mortgage  against  the  security  but  may  ask  for 
judgment  upon  the  bond,  in  case  the  amount  realized  upon  the 
sale  of  the  land  be  not  sufficient  to  satisfy  his  claim.  However 
the  bond  is  an  instrument  for  the  payment  of  money,  and  noth- 
ing prevents  the  lender  suing  upon  the  bond,  without  regard  to 
the  mortgage.  If  a  judgment  in  such  action  will  not  enable  the 
lender  to  collect  his  claim,  he  may  then,  upon  permission  of  the 
court,  sue  to  enforce  the  mortgage  by  foreclosure. 

Usury. — In  nearly  all  States  a  maximum  rate  of  interest  is 
fixed  by  law.  For  the  lender  to  collect  more  than  that  rate  is 
usury.  When  a  usurious  loan  is  made  in  some  States  the  lender 
may  collect  only  the  maximum  legal  rate  of  interest,  in  others 
he  loses  all  interest,  while  in  some  the  penalty  is  loss  of  the  en- 
tire amount  loaned  and  interest.  In  most  States  however,  a 
corporation  is  not  permitted  by  law  to  plead  the  defense  of 
usury.  If  therefore  the  borrower  be  a  corporation,  the  lender 
may  exact  any  rate  of  interest  the  borrower  agrees  to  pay. 
This  inability  of  corporations  to  seek  relief  in  the  usury  laws 
has  resulted  in  innumerable  corporations  coming  into  existence 
to  operate  in  realty;  lenders  feel  more  secure  in  loaning  to 


BONDS  AND  MORTGAGES  89 

them,  especially  if  a  fee  or  commission  be  charged  for  making 
the  loan. 

Money  for  mortgage  loans  is  purely  a  commercial  commod- 
ity. Its  value  depends  on  whether  or  not  it  is  plentiful.  When 
plentiful  the  interest  rate  is  low;  when  scarce,  high.  This  is 
not  a  matter  which  can  be  regulated  by  law;  it  is  purely 
economic.  The  usury  laws  do  not  protect  the  borrower.  In 
fact  they  usually  harm  him.  For  when  money  is  valuable  the 
lender  will  see  that  he  gets  a  fair  return,  and  since  that  may  ex- 
ceed the  maximum  allowed  by  law,  the  lender  fixes  the  interest 
rate  in  the  bond  at  the  maximum  allowed  by  law  and  collects 
the  difference  as  a  fee  or  commission  for  lending.  This  subjects 
the  lender  to  the  possibility  of  losing  the  entire  amount  of  his 
loan,  or  of  engaging  counsel  to  defend  a  claim  of  usury,  and  he 
naturally  charges  an  additional  amount  for  taking  the  risk. 
Consequently,  if  the  legal  maximum  were  six  per  cent,  and 
eight  per  cent  would  give  the  lender  a  fair  return,  he  collects 
not  only  that  amount  but  something  extra  as  a  safeguard.  This 
amount  is  paid  by  the  borrower.  So  the  usury  laws  actually 
add  to  his  burden. 

Taxation. — At  the  present  time  the  United  States  collects 
a  tax  upon  all  bonds  at  the  rate  of  five  cents  for  each  $100. 
This  tax  is  paid  by  the  borrower  who  must  affix  to  the  bond 
and  cancel  proper  internal  revenue  stamps  for  the  appropriate 
amount.  Bonds  are  personal  property  and  taxable  as  such. 
In  many  States,  including  New  York,  this  tax  is  not  levied  and 
collected  annually,  but  is  satisfied  by  the  payment  at  the  time 
the  mortgage  is  recorded,  of  a  certain  percentage  of  the  amount 
of  the  loan.  In  New  York  the  rate  is  one-half  of  one  per  cent 
of  the  principal  amount.  In  theory  this  tax  is  upon  the  lender; 
upon  his  personal  property,  the  bond.  Actually  the  law  works 
out  quite  differently,  as  in  nearly  all  cases  the  borrower  is  com- 
pelled to  pay  the  amount  of  the  tax  as  one  of  the  expenses  of 
procuring  the  loan. 

History  of  mortgage  lending. — Anciently  the  borrower 
deeded  his  property  outright,  as  security,  to  the  lender,  who 
thereafter  was  its  legal  owner.  In  case  of  any  default  he  took 
possession.  All  the  borrower  retained  was  an  equitable  right 
to  be  given  back  his  property  if  he  fully  satisfied  the  loan  and 
interest.  He  had  merely  an  "equity  of  redemption."  In  some 
States  this  system  is  still  used,  except  that  until  a  default  occur 
the  borrower  retains  possession  of  the  property. 


90   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

In  New  York  and  most  States  however  a  mortgage  is 
not  an  actual  transfer  of  title,  but  only  creates  a  lien,  under 
which  in  case  of  default  the  lender  may  proceed  to  collect  from 
the  property.  The  mortgage  not  being  a  transfer  of  title,  is 
personal  property.  As  such  it  may  be  passed  by  assignment, 
and  upon  the  lender's  death  goes,  not  to  his  heirs  as  if  real 
property,  but  to  his  executors  or  administrators.  Since  it  is 
only  a  lien,  there  may  be  a  first,  second,  third  or  as  many  mort- 
gages on  the  property  as  its  owner  can  procure,  each  being 
subject  or  subordinate  to  all  prior  mortgages. 

Form  of  mortgage. — The  form  of  mortgage  varies  some- 
what in  the  several  States.  In  New  York  the  form  is  pre- 
scribed by  statute.  It  is  substantially  similar  to  that  of  many 
other  States  and  is  as  follows : 

THIS  MORTGAGE,  made  the  day  of  nineteen 

hundred  and 

BETWEEN 

the  Mortgagor 
and  the  Mortgagee, 

WITNESSETH,  that  to  secure  the  payment  of  an  indebtedness  in  the  sum  of 

Dollars, 

lawful  money  of  the  United  States,  to  be  paid  on  the  day  of  . 

nineteen  hundred  and  ,  with  interest  thereon  to  be  computed  from 

at  the  rate  of  per  centum  per  annum,  and  to  be  paid 

according  to   a  certain  bond  or  obligation   bearing  even   date   herewith,   the 
Mortgagor  hereby  mortgages  to  the  Mortgagee 

AND 
the  Mortgagor  covenants  with  the  Mortgagee  as  follows: 

1.  That  the  Mortgagor  will  pay  the  indebtedness  as  hereinbefore  provided. 

2.  That  the  Mortgagor  will  keep  the  buildings  on  the  premises  insured  against 
loss  by  fire  for  the  benefit  of  the  Mortgagee. 

3.  That  no  building  on  the  premises  shall  be  removed  or  demolished  without 
the  consent  of  the  Mortgagee. 

4.  That  the  whole  of  said  principal  sum  shall  become  due  after  default  in 
the  payment  of  any  installment  of  principal  or  of  interest  for  days,  or 
after  default  in  the  payment  of  any  tax,  water  rate  or  assessment  for 

days  after  notice  and  demand. 

5.  That  the  holder  of  this  Mortgage,  in  any  action  to  foreclose  it,  shall  be 
entitled  to  the  appointment  of  a  receiver. 

6.  That  the  Mortgagor  will  pay  all   taxes,  assessments  or  water  rates,  and 
in  default  thereof,  the  Mortgagee  may  pay  the  same. 

7.  That  the  Mortgagor  within  days  upon  request  in  person  or 
within                           days  upon  request  by  mail  will  furnish  a  statement  of  the 
amount  due  on  this  Mortgage. 

8.  That  notice  and  demand  or  request  may  be  in  writing  and  may  be  served 
in  person  or  by  mail. 

9.  That  the  Mortgagor  warrants  the  title  to  the  premises. 

IN  WITNESS  WHEREOF,  this  Mortgage  has  been  duly  executed  by  the 
Mortgagor. 
In  presence  of: 

(ACKNOWLEDGMENT) 


BONDS  AND  MORTGAGES  91 

The  opening  words  "This  mortgage"  merely  identify  the 
instrument  as  such.  In  many  States  the  form  commences  "This 
indenture."  Next  appears  the  date;  not  a  requisite,  but  con- 
venient and  customary.  The  parties  are  then  named,  the  bor- 
rower first,  followed  by  the  lender,  just  as  in  the  bond.  After 
each  name,  must,  however,  be  added  the  party's  residence.  In 
this  form  they  are  designated  mortgagor  and  mortgagee,  re- 
spectively. Often  they  are  stated  to  be  "party  of  the  first 
part"  and  "party  of  the  second  part."  While  a  mortgage  is 
personal  property,  it  nevertheless  passes  an  interest  in  land. 
Consequently  if  the  borrower  be  married,  unless  the  mortgage 
was  given  to  secure  purchase  money,  his  v/ife  must  join  in  the 
mortgage  in  order  to  surrender  her  dower  right.  Her 
name  should  be  added  as  mortgagor  following  that  of  her  hus- 
band, and  it  should  be  indicated  that  she  is  his  wife  by  appropri- 
ate words;  as  "John  Jones  and  Mary  Jones,  his  wife."  "Wit- 
nesseth"  is  no  more  important  here  than  in  a  deed. 

Statement  of  the  obligation. — "That  to  secure  the  payment 
of  an  indebtedness,"  etc.,  "according  to  a  certain  bond  or  obli- 
gation bearing  even  date  herewith."  In  these  words  the 
obligation  of  the  bond  is  stated.  Care  should  be  exercised  to 
state  the  indebtedness  and  its  terms  of  interest,  etc.,  and  date  of 
repayment  exactly  the  same  in  both  bond  and  mortgage.  Any 
variation  may  create  later  trouble.  The  form  given  has  the 
interest  clause  partially  printed.  Should  the  bond  provide  for 
instalment  principal  payments  the  wording  may  be  easily  al- 
tered to  suit  the  requirement. 

The  bond  is  not  usually  recorded;  the  mortgage  should  be. 
Many  parties  to  mortgage  transactions  do  not  wish  the  terms 
of  the  loan  to  become  known  to  anyone  examining  the  records. 
It  has  therefore  become  quite  common  to  omit  a  specific  state- 
ment of  the  terms  of  the  obligation  in  the  mortgage.  If  such 
secrecy  is  desired,  this  provision  in  the  mortgage  may  be  made 
to  read  "that  to  secure  the  payment  of  an  indebtedness  in  the 
sum  of dollars  (stating  the  principal  sum)  se- 
cured to  be  paid,  together  with  the  interest  thereon  according 
to  a  certain  bond  or  obligation,"  etc.  This  wording  is  not  im- 
proper any  more  than  it  is  wrong  for  the  man  who  discounts 
his  paper  at  a  bank  to  fail  to  publish  to  the  world  the  terms 
upon  which  he  secures  credit. 

The  pledge. — As  security  for  the  performance  of  the  obli- 
gation just  stated,  "the  mortgagor  hereby  mortgages  to  the 


92    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

mortgagee"  the  realty  pledged  as  security.  Here  should  be  set 
forth  a  description  of  the  property.  It  should  be  described 
with  just  as  much  particularity  as  in  a  deed.  By  legal  construc- 
tion the  quoted  words  at  the  beginning  of  this  paragraph,  mean 
substantially  that  the  mortgagor  conditionally  transfers  a  right 
in  the  property  to  the  mortgagee,  of  such  nature  that  if  the 
loan  be  not  paid  in  accordance  with  the  bond,  the  property 
may  be  sold  to  satisfy  the  claim.  In  many  States  the  mortgage 
actually  states  that  the  borrower  "grants  and  releases"  the 
property  to  the  mortgagee.  Where  such  form  is  used  the  de- 
scription is  followed  by  a  "defeasance"  clause  which  states  that 
if  the  loan  and  interest  is  paid  in  due  course,  the  rights  of  the 
lender  are  defeated  and  his  interest  in  the  property  ceases. 
(Appendix  form  45.) 

Purchase  money  mortgages. — In  many  sales  of  realty  the 
purchaser  does  not  wish  to  pay  the  full  price  in  cash.  Under 
such  circumstances  it  is  stipulated  in  the  contract  between  the 
parties  that  the  purchaser  give  back  to  the  seller  his  bond  and 
a  mortgage  on  the  property  to  secure  part  of  the  price.  This 
is  known  as  a  purchase  money  mortgage.  Such  a  mortgage 
becomes  a  lien  contemporaneous  with  the  passing  of  title.  It 
is  prior  to  any  lien  against  the  purchaser.  Even  if  he  be  mar- 
ried it  is  a  lien  ahead  of  his  wife's  right  of  dower.  Conse- 
quently the  wife  need  not  join  in  a  purchase  money  mortgage. 
In  order  that  there  be  no  doubt  of  its  status,  it  is  customary  to 
insert  in  the  mortgage,  following  the  description,  what  is 
known  as  a  "purchase  money  clause"  reading  substantially  as 
follows : 

This  mortgage  being  a  purchase  money  mortgage  given  and  intended  to  be 
recorded  simultaneously  with  a  deed  this  day  executed  and  delivered  by  the 
mortgagee  to  the  mortgagor,  this  mortgage  being  given  to  secure  a  portion  of 
the  purchase  price  in  said  deed  expressed. 

Covenants. — The  New  York  statutory  form  of  mortgage 
contains  nine  covenants  made  by  the  mortgagor.  Not  all  of 
these  must  be  used;  occasionally  some  of  them  are  altered  or 
omitted,  and  often  others  are  added.  First  will  be  considered 
the  usual  covenants.  These  appear  in  the  form  of  mortgage 
set  out  in  this  chapter. 

By  the  first  covenant  the  mortgagor  agrees  to  pay  the  in- 
debtedness, and  not  only  that  but  to  do  so  as  provided  in  the 
mortgage.  It  implies  also  that  if  there  arise  any  default  in 
carrying  out  the  terms  of  the  obligation,  the  lender  may  have 


BONDS  AND  MORTGAGES  93 

the  property  sold  to  satisfy  his  claim  in  due  legal  course  by 
means  of  an  action  in  foreclosure. 

The  second  and  fourth  covenants  are  usually  set  forth  in  the 
bond.  They  should  accord  in  both  instruments.  Their  mean- 
ing is  explained  in  the  discussion  of  the  bond.  (Page  87.) 

The  third  covenant  prohibits  the  removal  or  demolition 
of  any  building  on  the  pledged  property.  This  prevents  any 
lowering  of  the  value  of  the  security.  The  land  might  be 
worth  $2,000;  the  building  $8,000.  Together  they  are  suffi- 
cient security  for  a  mortgage  loan  of  $5,000.  But  if  the  build- 
ing were  removed  the  pledge  would  be  entirely  inadequate. 
Should  the  borrower  attempt  any  such  act,  he  may  be  enjoined 
by  court  order  at  the  instance  of  the  lender,  who  may  also  forth- 
with call  the  loan  and  commence  foreclosure. 

The  fifth  covenant  is  known  as  the  "Receiver  clause."  An 
action  to  foreclose  the  mortgages  takes  several  months.  Dur- 
ing this  time  the  owner  is  collecting  the  rents,  thereby  getting 
all  the  benefits  from  the  property,  and  knowing  that  he  will 
soon  lose  it,  he  neglects  to  expend  anything  in  keeping  up  the 
property.  When  the  mortgage  contains  this  clause,  the  mort- 
gagee can  prevent  this  injustice,  by  applying  for  the  appoint- 
ment of  a  receiver.  The  receiver  steps  into  the  owner's  shoes, 
collects  the  rents  and  pays  the  carrying  charges  from  the  time 
of  his  appointment  till  the  sale  of  the  property  in  the  action. 
Whatever  net  profit  he  has  in  his  hands  at  the  termination  of 
his  duties  becomes  an  additional  fund  from  w1hich  the  mort- 
gagee may  satisfy  his  claim. 

The  sixth  covenant  is  an  agreement  on  the  mortgagor's  part 
to  pay  all  taxes,  assessments  and  water  rates.  If  they  are  not 
paid  the  mortgagee  may  call  a  default  under  the  fourth  cove- 
nant. But  this  covenant  goes  further  than  that.  It  permits 
the  mortgagee  to  pay  them,  if  the  mortgagor  fails  to  do  so,  and 
add  the  amount  of  such  payments  to  the  amount  of  principal 
and  interest  due  him. 

By  the  seventh  covenant  the  mortgagor  obligates  himself  to 
give,  within  a  certain  time  (usually  fixed  at  five  days  upon  re- 
quest in  person  or  ten  days  upon  request  by  mail)  a  statement 
of  the  amount  due.  Such  a  statement  is  known  as  an  "estoppel 
certificate."  Its  purpose  is  readily  explainable.  If  the  holder 
of  the  mortgage  desires  to  sell  it,  he  is  enabled  by  this  cove- 
nant to  place  in  his  assignee's  hands  a  statement  by  the  owner 
of  the  land  of  how  much  is  owing  on  the  mortgage.  The  pur- 


94   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

chaser  is  thereby  assured  that  no  claim  of  payment  or  reduc- 
tion can  be  later  made  by  the  debtor. 

The  eighth  covenant  specifies  that  the  notices  provided  in 
the  various  covenants  may  be  served  either  personally  or  by 
mail.  Without  this  clause  it  would  be  necessary  to  secure  per- 
sonal service  on  the  owner,  a  thing  which  is  often  very  difficult 
to  accomplish,  particularly  if  the  owner  desires  to  evade  serv- 
ice. A  notice  deposited  in  a  regularly  maintained  mail  recep- 
tacle, postpaid,  properly  addressed  is  presumed  to  have  been 
received  by  the  addressee. 

The  ninth  covenant  is  similar  to  the  covenant  of  warranty 
in  a  deed.  It  is  a  guarantee  by  the  mortgagor  that  he  has 
good  title  to  the  property  described  in  the  mortgage. 

Special  clauses. — In  addition  to  the  nine  foregoing  cove- 
nants, it  is  usual  to  insert,  when  appropriate,  certain  additional 
clauses  for  the  protection  of  either  or  both  of  the  parties. 

Sale  in  one  parcel. — One  of  these  special  clauses  pro- 
vides in  substance  that  in  the  event  of  foreclosure  of 
the  mortgage  the  mortgaged  premises  may  be  sold 
in  one  parcel.  Such  a  clause  is  naturally  needed  only 
in  a  mortgage  which  covers  more  than  one  lot.  The 
mortgage  might  cover  four  adjoining  lots  A.  B.  C.  and  D. 
Should  the  holder  of  the  mortgage,  by  reason  of  a  default,  fore- 
close on  the  property  he  must  offer  the  lots  for  sale  one  at  a 
time  and  only  so  many  are  sold  as  will  bring  sufficient  to  meet 
his  claim.  In  addition  if  the  mortgagor  has  sold  any  of  the 
lots  before  the  foreclosure,  the  mortgagee  is  met  with  the  rule 
that  the  lots  must  be  sold  in  the  action  "in  the  inverse  order  of 
alienation,"  i.e.  he  must  first  sell  such  of  them  as  are  still 
owned  by  the  mortgagor,  then  the  rest  by  selling,  the  last  one 
sold,  first  and  so  on  back  to  the  first  lot  sold  by  the  mortgagor. 
Should  a  sale  of  the  lots  separately  not  produce  sufficient  to 
pay  the  mortgagee's  claim  he  may  then  offer  them  for  sale  in 
bulk  taking  whichever  offer  brings  the  highest  bid.  This  en- 
tails inconvenience  and  many  properties  are  of  more  value  in 
one  piece.  Hence  the  clause  permitting  sale  in  one  parcel  is 
usually  used  unless  the  property  mortgaged  be  a  single  lot. 

Brundage  clause. — Mortgages  as  has  been  said  are  personal 
property  and  hence  subject  to  tax  as  such.  The  lender  in  con- 
sidering the  desirability  of  an  investment  takes  into  considera- 
tion not  only  the  interest  return,  but  also  any  taxes  which  may 
reduce  that  return.  In  case  the  taxes  rose  materially  the 


BONDS  AND  MORTGAGES  95 

mortgage  would  pay  a  lower  net  return.  The  mortgagee  may 
protect  himself  by  making  it  possible  for  him  to  call  in  his  loan 
in  the  event  of  an  increase  of  taxes.  In  New  York  and  several 
other  States  this  clause,  known  as  the  "Brundage"  clause  is 
used,  particularly  in  loans  made  by  the  title  companies.  Its 
usual  form  follows: 

In  the  event  of  the  passage  after  the  date  of  this  mortgage  of  any  law  of 
the  State  of  New  York,  deducting  from  the  value  of  land  for  the  purposes  of 
taxation  any  lien  thereon,  or  changing  in  any  way  the  laws  for  the  taxation  of 
mortgages  or  debt  secured  by  mortgage  for  State  or  local  purpose,  or  the 
manner  of  the  collection  of  any  such  taxes,  so  as  to  affect  this  mortgage,  the 
holder  of  this  mortgage  and  of  the  debt  which  it  secures,  shall  have  the  right 
to  give  thirty  days'  written  notice  to  the  owner  of  the  land  requiring  the  pay- 
ment of  the  mortgage  debt.  If  such  notice  be  given,  the  said  debt  shall  become 
due,  payable  and  collectible  at  the  expiration  of  said  thirty  days. 

Release  clause. — A  mortgage  may  cover  several  houses  or 
a  number  of  lots.  An  operator  may  have  bought  a  tract  of 
land  and  subdivided  it  into  lots  and  placed  a  mortgage  on  the 
whole.  His  scheme  is  to  sell  the  lots  to  individual  purchasers. 
But  the  mortgage  covers  each  lot;  and  it  is  necessary  to  sell 
separate  lots  free  of  the  mortgage.  The  most  convenient 
manner  in  which  this  end  may  be  accomplished  is  by  means  of 
a  clause  termed  "release  schedule"  inserted  in  the  mortgage. 
By  this  schedule  a  release  price  is  placed  on  each  lot.  When 
this  amount  is  paid,  the  mortgagee  executes  an  instrument 
which  releases  the  lot  from  the  mortgage.  Of  course,  even  if 
such  a  clause  were  not  in  the  mortgage,  the  operator  could  ar- 
range for  a  release,  but  it  would  be  a  matter  for  negotiation  as 
to  the  amount  to  be  paid  each  time  a  lot  were  sold.  The 
schedule  in  the  mortgage  saves  all  this  inconvenience  and  makes 
it  possible  for  the  operator  to  know  in  advance  just  what  he 
must  pay  to  release  each  lot.  It  is  customary  to  set  the  re- 
lease price  on  each  lot  slightly  higher  than  that  lot's  fair  pro- 
portion of  the  loan.  This  is  done  so  that  after  each  lot  is  re- 
leased, the  balance  better  secures  the  loan.  (Appendix  form 
51.) 

Clauses  in  junior  mortgages. — Junior  mortgages  (those 
subject  to  others  superior  in  lien)  usually  contain  two 
appropriate  clauses.  The  first  is  for  the  protection  of  the 
mortgagee  and  provides  that  if  the  mortgagor  default  in  pay- 
ment of  interest  on  any  prior  mortgage,  such  interest  may  be 
paid  by  the  mortgagee,  added  to  the  amount  of  his  loan  and  he 
may  forthwith  declare  a  default  and  proceed  to  foreclose. 


96    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

This  is  a  very  important  matter  to  the  junior  mortgagee.  Should 
the  prior  mortgage  be  foreclosed,  he  may  be  compelled  either 
to  abandon  his  lien  or  else  purchase  the  property  and  replace 
the  prior  mortgage.  This  clause  permits  him  to  prevent  a  de- 
fault in  the  prior  mortgagee,  while  he  forecloses  his  own  mort- 
gage. (Appendix  form  53.) 

Lifting  clause.  —  The  other  clause  usually  found  in 
junior  mortgages  is  the  "subordination  clause. "  This  is  de- 
signed for  the  protection  of  the  mortgagor,  the  owner  of  the 
property.  The  junior  mortgagee  when  he  made  his  loan  was 
willing  to  take  as  security  the  property  already  subject  to  a 
mortgage  or  mortgages  to  secure  a  certain  sum  or  sums. 
There  should  be  no  reason  why  his  mortgage  should  not  con- 
tinue in  the  same  subordinate  position.  But  without  any  pro- 
vision to  cover  the  situation,  the  junior  mortgagee's  mortgage 
would  automatically  become  a  first  lien  upon  payment  of  the 
prior  mortgage  claims.  Hence  it  is  customary  to  insert  a 
clause  by  which  the  junior  mortgage's  position  is  fixed.  The 
following  is  a  satisfactory  form: 

This  mortgage  is  subject  and  subordinate  to   a  mortgage  given  to  secure 

the  payment  of  $ and  interest,   recorded  in  the  office  of  the 

of  the  County  of   in  Liber   

of  Mortgages,  at  page ,  now  a  prior  lien  on  said  premises,  and  shall 

be  and  remain  subject  and  subordinate  to  said  mortgage  and  to  any  renewal 
or  extension  thereof  or  to  any  new  mortgage  given  to  replace  it  to  secure  an 
amount  not  exceeding  the  amount  of  said  mortgage. 

Special  forms  of  mortgages.    Building-loan  mortgage.— 
In  addition  to  the  form  of  mortgage  which  has  been  considered 
there  are  two  other  forms  of  mortgage  which  are  used  when 
appropriate. 

The  building  loan  mortgage  is  distinct  in  that  the  amount  of 
the  loan  is  not  fully  paid  to  the  borrower  when  the  bond  and 
mortgage  is  delivered.  Its  purpose,  as  the  name  implies,  is  to 
aid  a  builder  in  financing  the  erection  of  a  building.  Naturally 
the  amount  of  the  loan  is  based  upon  the  value  of  the  land  and 
the  completed  building.  The  lender  would  be  foolish  to  ad- 
vance the  entire  loan  before  erection,  yet  the  builder  does  not 
wish  to  commence  work  till  he  knows  he  can  rely  on  the  loan 
being  made.  To  provide  for  this  situation,  the  building  loan 
mortgage  came  into  use.  An  agreement  is  made  between  the 
lender  and  borrower  and  usually  filed  in  addition  to  the  bond 
and  mortgage.  This  agreement  provides  in  substance  that  the 
borrower  shall  erect  a  certain  building  (sufficiently  de* 


BONDS  AND  MORTGAGES  97 

scribing  it)  on  the  land  and  that  the  lender  shall  loan  upon 
the  security  of  such  land  and  building  a  specified  amount  to 
be  repaid  upon  completion  of  the  building.  The  agreement 
further  provides  that  the  amount  of  the  loan  shall  be  advanced 
to  the  borrower  in  instalments  as  the  building  progresses,  stat- 
ing either  that  the  amount  and  times  of  advances  are  to  be  at 
the  lender's  discretion,  or  in  certain  amounts  at  fixed  periods  in 
the  course  of  construction.  The  interest  specified  in  the  agree- 
ment, as  well  as  in  the  bond  and  mortgage,  is  payable  only  on 
the  amounts  of  the  instalments  from  the  date  of  advance.  It 
is  often  provided  that  the  loan  shall  continue  until  a  definite 
period  after  completion.  This  enables  the  builder  more  readily 
to  sell  his  house.  (Appendix  forms  54  and  55.) 

Trust  mortgages. — These  are  used  when  the  amount  of 
the  loan  is  larger  than  any  one  person  would  be  willing  to  ad- 
vance. Such  would  be  a  loan  of  millions  of  dollars  upon  the 
property  of  a  railroad.  In  these  loans  the  mortgage  is  made 
to  a  trustee.  Instead  of  a  single  bond,  many  are  issued;  one  or 
more  to  each  person  advancing  a  part  of  the  loan,  depending 
upon  the  denomination  of  the  bonds.  The  trustee  acts  as  such 
for  the  benefit  of  the  bondholders.  The  mortgage  contains  in 
addition  to  the  usual  clauses,  various  provisions  concerning  the 
rights  and  duties  of  the  trustee  and  the  bondholders.* 

Satisfaction  of  mortgage. — Every  loan  on  bond  and  mort- 
gage contemplates  payment,  ultimately,  of  the  amount  loaned 
with  interest.  The  mortgage  having  been  recorded  constitutes 
an  encumbrance  on  the  mortgagor's  title.  When  he  repays  the 
loan,  he  should  therefore  not  only  have  the  bond  and  mort- 
gage surrendered  to  him,  but  insist  upon  the  mortgagee  deliver- 
ing a  "satisfaction  piece."  (Appendix  form  47.)  This  is 
a  formal  instrument  describing  the  mortgage  and  stating  that 
it  is  paid.  It  must  be  signed  by  the  mortgagee,  who  should 
acknowledge  it.  It  may  then  be  recorded  in  the  public  office  in 
which  the  mortgage  was  recorded.  When  this  is  done  the 
original  record  of  the  mortgage  is  marked  cancelled,  and  no 
longer  appears  as  an  encumbrance  on  the  property.  Much 
trouble  may  arise  from  failure  to  get  a  satisfaction  piece,  or, 
having  it,  from  failure  to  record  it.  The  mortgage  remains 
of  record  indefinitely  and  if  the  satisfaction  be  not  filed,  it  may 
be  very  difficult  years  later  to  prove  its  payment. 

*For   example  cf  this  form  of  Mortgage,  see  Jones-Laughlin   Mortgage   in 
Gerstenberg,  "Materials  of  Corporation  Finance,"  p.  189. 


98    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

REMEDIES  OF  MORTGAGEE 

Mortgagee  in  possession. — In  event  of  failure  to  pay  the 
loan  when  due  or  any  other  default,  the  mortgagee  has  numer- 
ous remedies  in  respect  to  the  property  pledged  by  the  mort- 
gage. 

The  mortgagee  may,  with  the  consent  of  the  mortgagor,  take 
possession  of  the  mortgaged  property.  He  is  then  known  as  a 
"mortgagee  in  possession."  This  gives  him  no  greater  legal 
title  to  the  property  than  he  had  under  the  mortgage;  it  merely 
entitles  him  to  collect  the  benefits  of  the  property.  His  pos- 
sessory right  ceases  as  soon  as  he  has  been  paid  either  from  the 
revenue  out  of  the  property  or  by  the  mortgagor.  This  form 
of  remedy  is  seldom  utilized  by  the  mortgagee  as  he  must  ac- 
count for  all  receipts  from  the  property  and  years  may  pass  be- 
fore he  has  collected  the  amount  of  his  claim. 

Foreclosure  by  advertisement. — The  mortgagee  may  fore- 
close his  mortgage  by  exercising  the  right  given  him  in  the  mort- 
gage of  selling  the  property  to  pay  the  indebtedness.  It  is  not 
a  proceeding  in  a  court,  but  consists  of  giving  notice  to  the 
owner,  if  he  can  be  found,  and  advertising  a  public  sale  of  the 
property — hence  its  name  "foreclosure  by  advertisement."  It 
has  one  great  fault;  it  does  not  place  the  purchaser  at  the  sale  in 
possession  of  the  property.  The  owner  may  refuse  to  surren- 
der possession.  The  purchaser  is  then  able  to  get  pos- 
session only  by  means  of  a  tedious,  expensive  action  in  eject- 
ment. For  this  reason,  although  apparently  the  most  direct 
remedy,  foreclosure  by  advertisement  is  seldom  used  unless 
the  mortgagee  be  in  possession  at  the  time  of  the  sale. 

Legal  foreclosure. — The  usual  remedy  is  in  "foreclosure 
by  action  at  law."  A  legal  action  is  commenced  in  which  the 
owner  of  the  property  and  the  maker  of  the  bond  and  all  per- 
sons who  have  any  interest  in  the  property  subordinate  to  the 
mortgagee,  are  made  parties  defendant.  Of  course  prior  lien- 
ors  should  not  be  made  parties;  their  claims  cannot  be  affected. 
At  the  time  of  commencing  the  action,  a  notice  of  the  action 
should  be  filed  in  the  office  of  the  clerk  of  the  County  in  which 
the  property  is  located.  This  "notice  of  pendency"  or  "Lis 
Pendens"  as  it  is  often  erroneously  termed,  is  a  warning  to 
everyone  that  the  action  has  been  started  and  that  the  defen- 
dants' rights  are  being  attacked.  Anyone  acquiring  the  rights 
of  any  defendant  thereafter  assumes  them  with  presumed 
knowledge  of  the  action. 


BONDS  AND*  MORTGAGES  99 

The  complaint  describes  the  bond  and  mortgage,  states  that 
the  interests  of  the  defendants  are  subordinate  to  the  mort- 
gagee, that  a  default  has  occurred,  that  a  certain  sum  and  in- 
terest is  due  the  mortgagee,  and  asks  for  a  judgment  directing 
the  sale  of  the  property  free  of  the  interests  of  all  the  defen- 
dants; that  the  mortgagee  be  paid  his  claim  and  expenses  from 
the  proceeds  of  the  sale;  and^if  the  sale  realize  not  enough  for 
that  purpose,  that  a  judgment  for  deficiency  be  given  against 
the  maker  of  the  bond. 

A  copy  of  the  summons  and  complaint  must  be  served  on  all 
the  defendants.  They  are  given  a  certain  time  in  which  to 
formally  set  up  any  claim  they  may  have  contrary  to  the  allega- 
tions of  the  mortgagee's  complaint.  Should  any  of  the  de- 
fendants make  answer  to  the  complaint,  the  issue  must  be  tried 
out. 

If  no  answer  is  made,  or  if  the  issue  raised  by  answer  has 
been  found  in  favor  of  the  mortgagee,  he  proceeds  to  judg- 
ment. The  amount  due  him  is  ascertained  and  a  formal  judg- 
ment entered  in  his  favor  directing  the  sale  of  the  property  by 
a  referee  or  master  designated  or  by  the  sheriff.  All  defen- 
dants who  have  appeared  in  the  action  are  given  notice  of  the 
sale,  which  must  also  be  advertised  as  the  law  requires.  Any 
person  may  bid  at  the  sale  which  is  held  at  public  auction  in  a 
public  place.  If  the  property  be  a  plot  consisting  of  more  than 
one  lot,  and  there  be  no  clause  in  the  mortgage  permitting  the 
sale  in  one  parcel,  each  lot  must  be  offered  for  sale  separately. 

Upon  the  sale  the  property  may  or  may  not  bring  enough  to 
pay  the  mortgagee's  expenses  and  his  claim.  He  should  pro- 
tect himself  by  seeing  to  it  that  either  the  bid  of  an  outsider  is 
sufficient  to  cover  him  or  else  that  he  is  the  highest  bidder.  In 
this  way,  if  the  property  does  not  bring  enough  to  satisfy  his 
claim  he  gets  the  property,  while  if  more  than  enough  is  realized 
he  does  not  care  what  becomes  of  it.  The  amount  bid  is  paid 
to  the  officer  conducting  the  sale,  who  first  pays  the  expenses  of 
sale,  then  the  expenses  of  the  action.  After  he  has  done  this  he 
pays  the  mortgagee's  claim  or  as  much  as  the  balance  will  pay. 
If  he  has  more  than  sufficient  to  satisfy  the  mortgagee's  claim, 
he  retains  the  surplus  and  deposits  it  in  the  custody  of  the 
Court. 

He  then  files  a  report  of  his  proceedings  with  the  Court.  If 
his  report  shows  that  he  did  not  realize  sufficient  to  pay  the 
mortgagee's  claim,  he  specifies  the  amount  of  the  deficiency,  and 


100    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

the  mortgagee  may  enter  a  judgment  against  the  maker  of  the 
bond  in  that  amount.  Should  there  be  a  surplus  the  referee 
must  specify  its  amount.  Any  person  having  a  valid  claim 
against  the  property,  which  was  cut  off  in  the  foreclosure,  may 
commence  a  "surplus  money  proceeding"  in  which  the  rights 
and  order  of  priority  of  all  claimants  is  ascertained  and  the 
surplus  divided,  as  far  as  it  will  go,  to  those  entitled,  in  order 
of  their  priority. 

The  purchaser  at  the  sale  upon  paying  the  amount  of  his  bid 
receives  a  deed  of  the  property  from  the  officer  who  conducted 
the  sale.  This  deed  entitles  him  to  possession  of  the  property, 
and  he  may  have  the  aid  of  the  court  in  removing  from  posses- 
sion any  one  who  was  made  a  party  to  the  action.  It  is  for  this 
reason  that  all  tenants  and  persons  in  possession  of  the  mort- 
gaged property  are  made  defendants,  even  though  they  have 
no  leases  or  any  recorded  claim  to  the  property. 


CHAPTER  IX 

TRANSFER  AND  EXAMINATION  OF  TITLE  AND 
TITLE  INSURANCE 

History  of  methods  of  transferring  title. — Probably  the 
earliest  transfers  of  title  were  accomplished  by  the  stronger 
taking  possession  from  the  weaker.  This  system  was  unjust 
and  as  society  developed,  protection  was  given  to  the  owner 
in  preserving  his  possession.  Under  the  feudal  system  the 
sovereign  or  king  owned  all  the  land.  He  parcelled  out  the 
land  to  his  lords  who  in  turn  each  subdivided  his  portion 
among  his  retainers.  This  subdivision  went  on  indefinitely. 
No  one  had  any  title  save  the  king.  Each  had  only  a  "feud" 
or  right  to  possess  the  land  during  the  pleasure  of  his  over- 
lord; the  tenant  being  bound  to  give  his  superior  aid  and  fealty, 
the  superior  to  protect  the  tenant.  The  tenant  could  not  even 
give  up  his  possession  or  transfer  it  without  his  overlord's  con- 
sent. The  evils  of  this  system  finally  resulted  in  laws  by 
which  it  was  made  possible  for  a  tenant  to  sell  his  holding  and 
substitute  another  in  his  place. 

The  early  method  by  which  a  transfer  of  realty  was  accom- 
plished, was  by  mere  delivery  of  possession.  A  man  who  had 
been  in  possession  of  land  for  many  years,  and  whose  claim 
to  it  had  never  been  questioned,  was  presumed  to  be  its  owner. 
No  one  could  contradict  his  claim  of  title.  This  is  the  founda- 
tion of  our  present  law  of  "title  by  adverse  possession.'7  If 
such  owner  desired  to  sell  he  simply  delivered  to  the  purchaser 
a  clod  of  earth  from  the  land,  in  the  presence  of  witnesses, 
saying  at  the  time  some  appropriate  words  such  as,  "I  put  you 
in  possession  of  this  land."  This  was  as  nearly  an  actual  de- 
livery as  the  subject  matter  of  sale  would  permit. 

The  statute  of  frauds. — Transfers  by  delivery  only  neces- 
sarily gave  rise  to  many  disputes.  There  being  no  written 
record  of  the  transaction,  false  statements  permitted  gross 
frauds.  Possession  was  forcibly  taken  and  held.  The  "Stat- 
ute of  Frauds"  was  finally  adopted.  This  prevented  fraud 
by  declaring  that  no  transfer  should  be  enforcible  unless  in 
writing.  From  this  statute  flows  the  present  system  of  trans- 
ferring title  by  means  of  written  instruments;  the  deed,  mort- 

101 


102    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

gage,  lease,  etc.  The  Statute  of  Frauds  in  substance  has  been 
enacted  into  the  law  of  all  the  States. 

Present  methods  of  transferring  title. — The  term  title  must 
be  considered  as  including  not  only  the  full  fee  simple  but  any 
interest  in  the  real  property.  Under  strict  legal  rules  title  to 
real  property  can  be  transferred  in  only  two  ways,  either  by 
operation  of  law  or  by  purchase:  transfer  by  operation  of 
law  taking  place  only  when  the  title  passes  to  the  heirs  of  an 
owner  who  dies  leaving  no  will.  Every  other  transfer  is  con- 
sidered a  purchase. 

For  all  practical  purposes,  however,  as  indicated  in  the  first 
chapter,  title  to  realty  may  be  transferred  in  any  one  of  the 
following  ways: 

1.  By  descent. 

2.  By  will. 

3.  By  voluntary  alienation. 

4.  By  involuntary  alienation. 

Title  by  descent. — One  who  dies  leaving  no  will,  is  said  to 
have  died  intestate.  Such  property  as  he  may  have  owned  at 
his  death  passes  to  his  family  by  operation  of  law.  The 
rights  and  priorities  of  the  persons  entitled  to  share  in  his 
estate  are  fixed  by  law  in  the  several  States.  Those  to  whom 
the  real  property  passes  are  termed  heirs,  while  those  who 
take  the  personal  property  are  called  next  of  kin.  The  widow 
curiously  enough  while  she  takes  an  interest  in  both  the  real 
and  personal  property  is  neither  an  heir  or  next  of  kin.  As 
to  the  real  property,  if  there  be  a  widow,  it  immediately  be- 
comes subject  to  her  dower  rights.  If  there  be  children  of 
the  deceased  owner,  the  realty  is  divided  among  them  in  equal 
shares,  if  they  all  be  living.  Should  any  of  them  be  dead  leav- 
ing children,  such  children  divide  equally  the  share  their  parent 
would  have  taken  if  living.  For  example ;  The  deceased  had 
four  children,  A.  B.  C.  and  D.  A.  B.  and  C.  survived  him. 
D  predeceased  him  but  left  two  children  who  were  living  at 
the  death  of  their  grandparent.  A.  B.  and  C.  each  receive 
one-fourth  and  the  two  grandchildren  each  one-eighth.  If 
there  be  no  children  or  issue  of  deceased  children  the  property 
goes  to  the  parents  of  the  deceased  and  his  collateral  relatives 
i.e.  brothers  and  sisters  and  their  descendents  in  accordance 
with  the  law  of  the  State  in  which  the  property  is  situate. 

Title  by  will. — An  owner  may  dispose  of  his  property  dur- 


TITLE  AND  TITLE  INSURANCE  103 

ing  his  lifetime,  by  deed,  mortgage,  lease,  etc.  He  may  also 
make  disposition  of  it  to  take  effect  at  his  death.  This  is 
usually  accomplished  by  will  or  as  it  is  legally  termed  "last 
will  and  testament."  The  owner  making  the  will  is  known 
as  the  testator,  and  having  done  so  he  is  said  to  have  died  tes- 
tate. The  will  must  be  executed  with  certain  formalities,  re- 
quired by  law.  Upon  the  testator's  death  it  is  offered  for 
probate  to  an  appropriate  court,  which,  if  the  will  is  regular 
and  no  valid  objection  be  raised,  admits  it  to  probate,  and  a 
public  record  of  it  is  made.  While  many  laymen  attempt  to 
draw  wills,  such  practise  is  exceedingly  dangerous.  Any  error 
in  form  or  manner  of  execution  may  invalidate  the  will  and 
usually  such  error  is  not  discovered  until  the  will  is  offered  for 
probate,  when,  the  testator  having  died,  it  is  too  late  to  rem- 
edy the  mistake. 

A  gift  of  real  property  is  a  devise  and  the  recipient  a  de- 
visee; of  personal  property  a  bequest  or  legacy,  the  recipient 
a  legatee.  These  terms  are  often  erroneously  used  inter- 
changeably, and  sometimes  grave  troubles  arise  from  such 
carelessness.  As  has  been  said  the  will  cannot  cut  off  the  wife's 
dower  rights.  Consequently  it  is  usual  for  the  testator  to 
make  some  provision  for  his  wife,  stating  that  it  is  "in  lieu  of 
dower."  Even  such  provision  is  binding  upon  her  only  in 
case  she  fail  within  a  certain  legal  time  to  elect  to  take  her 
dower  rights  instead. 

A  will  should  and  usually  does  appoint  an  executor  who  is 
empowered  to  carry  out  its  terms  and  provisions.  Unless  the 
will  gives  him  rights  and  duties  with  reference  to  the  realty, 
he  has  no  interest  in  the  real  property.  It  passes  to  the  de- 
visees immediately  upon  the  testator's  death;  the  executor's 
duties  being  only  to  collect  the  personal  property,  pay  debts 
and  legacies,  and  account  to.  the  court. 

Title  by  voluntary  alienation. — Alienation  may  be  defined 
for  practical  purposes  as  the  transfer  of  the  owner's  interest 
and  title  by  the  owner  to  another.  Voluntary  alienation  may 
be  by  gift  or  sale.  It  is  the  normal  commercial  real  estate 
transaction;  such  as  the  deed  of  gift  by  a  parent  to  his  daugh- 
ter of  a  home  upon  her  marriage,  or  the  sale  of  realty  under 
a  contract  consummated  by  the  delivery  of  a  deed.  Mort- 
gages and  leases  are  both  instances  of  voluntary  alienation. 

Title  by  involuntary  alienation. — Involuntary  alienation 
is  a  transfer  of  the  title  without  the  owner's  volition.  Tax 


104   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

sales  are  instances  of  involuntary  alienation,  also  public  sales 
in  actions  to  enforce  liens.  The  property  of  the  intestate 
leaving  no  heirs,  which  passes  to  the  State  by  escheat  is  a 
transfer  of  title  of  this  class.  An  unusual  example  is  the  loss 
of  the  land,  under  certain  circumstances,  through  erosion,  or 
washing  away.  And  of  the  same  nature  is  accretion  or  the 
increase  of  an  owner's  land  through  the  action  of  currents  de- 
positing soil  adjacent  to  his  land.  His  area  is  increased  by 
no  voluntary  action  of  his. 

Another  example  of  involuntary  alienation  is  known  as  title 
by  "adverse  possession/'  This  situation  arises  where  the 
record  owner  of  the  property  has  failed  to  keep  possession 
and  the  property  has  been  seized  adversely  by  another.  The 
elements  for  a  title  by  adverse  possession  differ  in  the  various 
States  but  in  general  are  as  follows : 

1.  The  possession  of  the  claimant  must  be  open  and  no- 
torious. 

2.  It  must  be  hostile  to  and  to  the  exclusion  of  the  true 
owner. 

3.  The  possession  must  be  under  a  claim  of  title. 

4.  Possession  must  continue  uninterruptedly  for   at  least 
twenty  years. 

If  the  claimant  can  prove  all  of  the  above  elements  he  has 
a  good  title  to  the  property  and  all  the  rights  of  the  record 
owner  cease.  It  is,  however,  exceedingly  dangerous  to  pur- 
chase property  from  one  whose  sole  claim  of  ownership  is 
based  on  adverse  possession.  This  is  for  the  reason  that  a 
title  running  through  a  chain  of  deeds  is  perpetuated  on  the 
records;  while  a  title  by  adverse  possession  depends  for  its 
validity  upon  the  above  elements,  no  proof  of  which  appears 
of  record,  consequently  if  the  person  or  persons  who  know  the 
facts  concerning  the  adverse  possession  die,  it  is  no  longer  pos- 
sible to  prove  the  elements.  No  one  should  acquire  title  from 
an  adverse  possessor  except  upon  competent  legal  advice. 

Recording  of  conveyances. — Possession  of  property  is  no- 
tice to  the  world  that  the  possessor  claims  or  has  some  title  to 
the  property.  An  owner  in  possession  under  a  valid  deed 
may  be  discovered  to  the  actual  knowledge  of  any  one  who 
goes  to  the  property.  However  it  is  not  always  practicable 
for  the  owner  to  be  actually  in  possession.  He  may  own  many 
buildings  or  the  structure  may  be  an  office  or  factory  building 
or  vacant  land.  One  might  go  to  the  premises  many  times 


TITLE  AND  TITLE  INSURANCE  105 

and  not  find  the  owner.  Some  method  of  constructive  notice 
of  ownership  had  to  be  devised  as  a  substitute  for  actual 
knowledge,  for  the  protection  of  both  the  owner,  to  relieve 
him  of  the  necessity  of  remaining  constantly  in  possession,  and 
of  persons  who,  desiring  to  deal  with  the  property,  would  wish 
to  ascertain  the  real  owner.  Otherwise  A,  an  owner  might 
sell  his  land  to  B  giving  him  a  deed,  and  B  not  taking  posses- 
sion, A  might  turn  about  and  sell  it  to  C.  Or  he  might  give 
a  mortgage  to  D  to  secure  a  loan  after  he  had  sold  to  B.  To 
prevent  such  frauds,  recording  acts  have  been  enacted  in  all 
States.  These  provide  that  all  instruments  affecting  real  prop- 
erty may,  when  properly  proven,  be  recorded  in  a  certain 
public  office  in  the  county  where  the  property  is  located.  All 
such  instruments  are  copied  on  the  records  and  indexed.  When 
so  recorded  they  are  notice  to  the  world  with  exactly  the  same 
effect  as  if  the  owner  were  actually  in  possession. 

Constructive  notice  is  just  as  good  as  actual  notice.  Con- 
sequently one  dealing  with  real  estate  is  bound  by  all  recorded 
instruments.  Suppose  A  sells  a  piece  of  land  to  B  and  B  fails 
to  record  his  deed,  A  then  sells  it  again  to  C,  who  knows 
nothing  of  the  prior  sale  to  B  and  records  his  deed  before 
B's  deed  is  recorded.  Under  the  theory  of  notice  Cs  right 
to  the  property  is  ahead  of  that  of  B,  for  the  reason  that  B 
was  not  in  possession  and  the  records  at  the  time  C  bought  the 
property  showed  title  in  A.  B  should  have  protected  himself 
by  recording  his  deed  as  soon  as  he  received  it.  Constructive 
notice  is  however  no  better  than  actual  knowledge.  If  C,  in 
the  case  above,  had  known  of  B's  purchase,  he  could  not  ob- 
tain any  right  superior  to  B  by  virtue  of  recording  his  deed 
first. 

Proof  of  execution. — No  instrument  may  be  recorded  un- 
less proven  either  by  acknowledgment  of  the  signor  or  the 
affidavit  of  a  subscribing  witness.  The  following  are  the  of- 
ficials who  are  authorized  to  take  acknowledgments;  notaries 
public,  commissioners  of  deeds,  justices  of  the  peace,  judges 
of  courts  of  record,  mayors  of  cities,  ambassadors  and  minis- 
ters residing  abroad,  consular  agents,  and  commissioners  of 
deeds  appointed  by  governors  of  States  to  take  acknowledg- 
ments in  other  States.  Each  of  these  officials  has  definite  limits 
of  authority.  He  cannot  act  outside  the  area  of  his  authority. 
He  may  take  therein  an  acknowledgment  of  an  instrument  to 
be  recorded  elsewhere.  When  he  does  this  the  instrument 


106    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

cannot  be  recorded  elsewhere  without  a  certificate  attached 
from  the  clerk  of  the  court  of  the  county  or  city  in  which  the 
official  is  qualified  to  act,  stating  that  the  official  is  qualified 
to  take  acknowledgments  of  instruments  intended  to  be  re- 
corded in  that  State,  that  the  signature  of  the  official  is  known 
Co  the  clerk  and  the  signature  affixed  to  the  certificate  of  ac- 
knowledgment is  genuine.  (Appendix  form  29.) 

Examination  of  records. — It  is  readily  seen  that,  not  only 
must  one  who  contemplates  a  real  estate  transaction  inspect  the 
realty  involved,  but  must  also  procure  a  thorough  examination 
of  the  records  to  ascertain  who  is  the  owner,  the  condition  of 
the  title  and  all  instruments  concerning  which  the  law  pre- 
sumes everyone  to  have  notice.  The  examination  reveals  the 
entire  history  of  the  title  from  the  earliest  record  to  the  pres- 
ent time ;  shows  the  chain  of  deeds,  wills  and  actions  by  which 
the  property  passed  from  owner  to  owner,  as  well  as  mort- 
gages, leases,  restrictive  and  other  agreements  and  instruments 
encumbering  or  affecting  the  title  or  use  of  the  property.  The 
examiner  first  abstracts  all  the  instruments  conveying  the  title; 
that  is,  makes  a  separate  digest  of  each.  This  gives  him  what 
is  known  as  a  chain  of  title.  He  may  find  his  chain  very  sim- 
ple, as  a  grant  from  the  State  to  A  and  successive  deeds  from 
A  to  B,  B  to  C,  C  to  D,  D  to  E,  E  to  F,  F  being  the  present 
owner.  Usually  some  one  in  the  chain  has  died  owning  the 
property.  In  that  event  he  may  find  deeds  from  A  to  B, 
and  B  to  C  and  no  deed  from  C  although  F  claims  ownership. 
The  probability  is  that  C  has  died  owning  the  property.  In 
that  case  his  will  has  been  probated  (if  he  left  one)  and  is  on 
record  in  the  Court.  If  he  left  no  will,  it  will  usually  be  found 
that  an  administrator  of  his  personal  property  has  been  ap- 
pointed, and  the  papers  on  file  for  that  purpose  state  the  names 
of  his  heirs.  The  examiner  accordingly  turns  to  the  records 
of  deaths  and  wills  to  fill  the  gap,  and  finds  the  will  or  record 
of  death  of  C.  This  supplies  him  with  the  names  of  C's  de- 
visees or  heirs  and  he  then  resumes  his  search  by  locating  the 
deed  from  them  to  D  and  so  continues  his  chain.  The  chain 
is  often  broken  by  some  legal  action,  as  for  instance  a  fore- 
closure. Some  person  in  the  chain  may  have  mortgaged  the 
property.  The  chain  of  title  stops  in  D.  A  search  of  the  rec- 
ords of  legal  actions  shows  that  D  was  cut  off  in  a  foreclosure 
suit.  Examination  of  the  judgment  in  the  action  reveals  the 
name  of  the  official  who  sold  and  gave  a  deed  of  the  property. 


TITLE  AND  TITLE  INSURANCE  107 

Search  against  him  will  show  his  deed  and  the  chain  is  re- 
sumed. After  the  chain  of  title  is  completed  separate  search 
is  made  against  each  owner  for  the  period  he  owned  the  prop- 
erty, to  ascertain  what  encumbrances  he  may  have  placed  upon 
the  property. 

The  examiners  completed  work  in  an  "abstract  of  title." 
(Appendix  form  58.)  In  many  States  the  abstract  passes 
with  each  sale  of  the  property,  being  kept  up  to  date  by  the 
addition  of  a  memorandum  of  each  new  transfer.  It  is  deemed 
so  valuable  that  in  some  States  it  is  customary  to  provide  in 
the  contract  of  sale  that  the  seller  deliver  the  abstract  of  title 
at  or  before  the  delivery  of  the  deed.  (See  Illinois  contract  of 
sale,  appendix  form  10.) 

The  title  examiner. — The  law  of  real  property  is  compli- 
cated and  technical.  The  average  person  dealing  in  real  es- 
tate has  no  knowledge  of  these  rules  nor  has  he  time  to  ex- 
amine the  title.  He  usually  employs  counsel  or  a  conveyancer 
to  do  this  work  for  him;  someone  who  is  familiar  with  the 
records,  their  location,  indices  and  more  important,  the  law 
applicable  to  the  various  situations  in  the  title  which  the  ex- 
amination might  reveal.  The  responsibility  of  the  examiner 
to  his  employer  should  be  noted.  He  does  not  guarantee  the 
result  of  his  search.  He  simply  holds  out,  first,  that  he  has  suffi- 
cient knowledge  and  experience  to  be  a  competent  examiner  of 
titles  and,  second,  that  he  will  with  diligence  use  his  knowledge 
in  accordance  with  the  appropriate  rules  of  law.  His  report  of 
title  is  only  his  opinion;  backed  to  be  sure  by  his  legal  training 
and  a  careful  scrutiny  of  the  records.  The  records  are  copies 
of  instruments;  he  is  not  responsible  if  the  signature  on  some 
deed  in  the  chain  later  proves  to  be  a  forgery.  C  may  have 
died  intestate  owning  the  property.  X  and  Y  thereafter  con- 
veyed the  property  by  deed  reciting  that  they  are  the  only 
heirs  of  C.  Z  may  thereafter  claim  to  have  been  an  heir  as 
well.  The  examiner  is  not  to  blame.  He  may  pass  upon 
some  situation  in  the  title  in  accordance  with  the  law  as  then 
in  force.  Later  a  court  may  reverse  the  decision  upon  which 
the  examiner  based  his  opinion.  For  none  of  these  things  is 
the  examiner  liable  yet  his  employer  may  lose  large  sums  as 
a  result. 

Title  insurance. — The  system  of  title  insurance  came  into 
use  as  a  remedy  for  the  previously  described  situation.  Like 
all  other  insurance  it  is  a  distribution  of  loss  among  all  in- 


108    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

sured.  Title  companies  are  organizations  authorized  by  law 
to  examine  and  insure  titles.  They  charge  a  fee  or  premium 
for  their  service.  This  premium  is  usually  based  upon  the 
value  of  the  property.  It  is  an  amount  which  covers  not  only 
the  expense  of  the  examination  but  an  additional  amount  which 
is  placed  in  a  general  fund  to  cover  losses  insured  against.  The 
company  makes  a  careful  examination  of  the  title.  If  it  is 
satisfied  that  there  are  no  apparent  defects  in  the  title,  it  in- 
sures against  any  loss.  Should  there  later  be  a  loss,  by  reason 
of  forgery  or  any  other  defect,  arising  prior  to  the  insurance, 
the  title  company  pays  the  loss.  This  in  brief  is  the  theory 
of  title  insurance. 

In  seeking  title  insurance  the  person  about  to  acquire  the 
title  or  some  interest  in  the  real  property  first  applies  to  the 
title  company.  He  agrees  to  pay  a  certain  fee  for  examina- 
tion of  the  title.  The  title  company  on  its  part  obligates  itself 
to  make  an  examination  of  the  title  and  to  insure  against  un- 
discovered defects;  it  does  not  agree  to  insure  against  defects 
and  encumbrances  which  m'ay  appear  from  the  examination. 

The  applicant  should  therefore  insist  that  he  be  given  a 
"report  of  title"  after  the  examination  is  completed.  This 
is  a  statement  setting  forth  a  description  of  the  property,  the 
name  of  the  record  owner  and  a  detailed  list  of  all  objections 
to  the  title,  i.e.  encumbrances  and  defects  found  upon  the  rec- 
ords. The  reason  for  having  this  report  is  simple.  It  en- 
ables the  applicant  to  know  the  exact  condition  of  the  title. 
If  he  is  a  purchaser,  his  contract  stipulates  that  he  shall  take 
title  subject  to  certain  encumbrances.  The  report  sets  forth 
all  the  encumbrances  found  on  the  records.  The  purchaser 
demands  that  the  seller  dispose  of  all  those  not  agreed  upon 
in  the  contract,  before  delivering  a  deed.  Or  if  the  applicant 
had  agreed  to  make  a  mortgage  loan  he  insists  that  the  owner 
render  his  title  free  and  clear  before  the  loan  is  made. 

After  the  objections  not  agreed  upon  have  been  removed, 
the  title  is  closed,  and  the  instruments  passing  title  arc  deliv- 
ered and  recorded.  The  title  company  now  prepares  to  issue 
its  policy  of  title  insurance.  There  may  of  course  still  be  en- 
cumbrances on  the  property,  which  have  been  agreed  upon. 
For  example,  the  transaction  may  be  a  sale  of  the  property 
subject  to  one  or  more  mortgages.  The  policy  should  be  care- 
fully examined  to  see  that  the  property  is  properly  insured 
without  any  exceptions  other  than  those  agreed  upon. 


TITLE  AND  TITLE  INSURANCE  109 

Title  insurance  policy. — The  usual  form  of  title  insurance 
policy  contains  four  parts : 

1.  Agreement  of  insurance. 

2.  A  schedule  describing  the  subject  matter  of  insurance. 

3.  A  schedule  of  exceptions. 

4.  Conditions  of  the  policy. 

The  agreement  of  insurance  usually  states  substantially  that 
the  company  uin  consideration  of  the  payment  of  its  charges  for 
the  examination  of  this  title  to  it  paid  doth  hereby  insure  and 

covenant  that  it  will  keep  harmless  and  indemnify 

(hereinafter  termed  the  assured)  and  all  other  persons  to 
whom  this  policy  may  be  transferred  with  the  assent  of  this 
company,  testified  by  the  signature  of  the  proper  officer  of  this 
company,  endorsed  on  this  policy,  against  all  loss  or  damage 

not  exceeding dollars  which  the  said  assured  shall 

sustain  by  reason  of  defects,  or  unmarketability  of  the  title  of 
the  assured  to  the  estate,  mortgage  or  interest  described  in 
Schedule  'A'  hereto  annexed,  or  because  of  liens  or  encum- 
brances charging  the  same  at  the  date  of  this  policy.  EX- 
CEPTING judgments  against  the  assured  and  estates,  de- 
fects, objections,  liens  or  encumbrances  created  by  the  act  or 
with  the  privity  of  the  assured,  or  mentioned  in  Schedule  *B' 
or  excepted  by  the  conditions  of  this  policy  hereto  annexed  and 
hereby  incorporated  into  this  contract,  THE  LOSS  and  the 
amount  to  be  ascertained  in  the  manner  provided  in  the  an- 
nexed conditions  and  to  be  payable  upon  compliance  by  the  as- 
sured with  the  stipulations  of  said  conditions  and  not  other- 
wise." This  agreement  is  dated  and  executed  by  the  proper 
officers  of  the  company  under  its  corporate  seal. 

The  company's  charge  is  a  fixed  rate  based  usually  on  the 
amount  of  insurance  named.  Unlike  other  insurance  it  is  a 
flat  fee,  paid  but  once.  Customarily  the  company  insists  that 
the  property  be  insured  for  at  least  its  full  value.  And  the 
insured  also  should  want  this,  as  the  company  is  in  no  case  ob- 
ligated to  pay  more  than  the  amount  set  forth  in  the  policy. 
The  insured  may  if  he  contemplate  improving  the  property, 
have  his  title  insured  for  a  greater  sum  than  its  value  at  the 
time  of  transfer.  The  date  of  the  policy  is  very  important. 
The  company  insures  only  against  loss  to  the  insured  arising 
from  some  defect  at  or  prior  to  the  date  of  the  policy.  The 


110    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

insured  should  insist  that  the  policy  be  dated  at  or  after  the 
time  title  is  closed.  The  policy  being  issued  under  seal  the 
time  to  sue  upon  it  does  not  begin  to  run  until  a  loss  is  sus- 
tained. The  statute  of  limitations  may  be  twenty  years.  The 
loss  might  not  occur  till  fifteen  years  after  the  policy  were 
issued.  In  such  case  the  right  to  sue  on  the  policy  would  not 
expire  till  thirty-five  years  after  the  policy's  date. 

The  schedule  describing  the  subject  matten  of  insurance 
usually  follows  the  agreement  of  insurance.  It  is  divided  into 
three  parts.  First  it  states  the  estate  or  title  of  the  insured. 
Second  is  a  brief  description  of  the  instrument  under  which 
the  insured  acquired  his  estate  or  interest.  Third  is  a  descrip- 
tion of  the  premises  covered  by  the  policy.  This  description 
should  be  sufficiently  detailed  so  that  the  property  may  be 
easily  identified.  The  policy  covers  not  only  the  land  but  all 
buildings  and  fixtures  thereon.  It  does  not  cover  personalty 
The  insured  should  see  to  it  that  the  description  is  clear. 

The  schedule  of  exceptions  is  practically  the  most  important 
part  of  the  policy.  It  sets  forth  a  detailed  list  of  all  encum- 
brances and  defects  against  which  the  company  does  not  in- 
sure. Any  loss  arising  from  any  of  these  exceptions  is  not 
covered  by  the  policy.  The  insured  should  insist  that  only 
such  encumbrances  as  he  'has  agreed  to  be  inserted.  Much 
trouble  has  arisen  on  this  point,  and  many  companies  insist 
before  closing  of  title,  that  the  insured  consent  in  writing  to 
such  objections  to  the  title  as  have  not  been  removed.  Nearly 
all  companies  refuse  to  insure  against  the  rights  of  tenants  and 
persons  in  possession  of  the  property.  Hence  this  exception 
usually  appears.  All  encumbering  facts  shown  by  a  survey 
are  excepted,  or  if  there  be  no  survey,  the  policy  will  except 
"any  state  of  facts  an  accurate  survey  may  show." 

The  last  part  of  the  policy  is  a  statement  of  the  conditions 
of  the  policy.  These  conditions  are  seldom  read  but  are  very 
important.  They  specify  the  terms  of  the  company's  liability 
and  the  relations  between  the  company  and  the  insured.  First 
it  is  stipulated  that  the  company  will  at  its  own  cost  defend 
the  insured  in  all  actions  founded  on  a  claim  of  title  or  encum- 
brance prior  to  the  date  of  the  policy  and  thereby  insured 
against.  This  not  only  assures  the  insured  against  loss  but 
saves  him  the  inconvenience  and  expense  of  litigation. 

Should  the  insured  contract  to  sell  the  property  and  the 
purchaser  reject  the  title  for  some  defect  not  excepted  in  the 


TITLE  AND  TITLE  INSURANCE  111 

policy,  the  company  reserves  the  option  of  either  paying  the 
loss  or  maintaining  at  its  own  expense  an  action  to  test  the 
validity  of  the  defect.  In  such  a  case  the  company  is  not  liable 
under  the  policy  until  the  termination  of  the  litigation. 

If  the  policy  is  issued  to  a  mortgagee,  the  company's  respon- 
sibility arises  only  in  the  event  that  upon  foreclosure  the  mort- 
gage is  adjudged  to  be  a  lien  upon  the  property  of  an  inferior 
quality  to  that  described  in  the  policy,  or  the  purchaser  at  the 
foreclosure  sale  is  relieved  by  the  court  of  completing  his  pur- 
chase by  reason  of  some  defect  not  excepted  in  the  policy. 

The  conditions  of  the  policy  also  provide  for  arbitration  in 
certain  cases  of  disputes  as  to  the  validity  of  objections  to  the 
title  insured.  The  policy  covers  the  insured  even  after  he  has 
sold  the  property,  if  he  be  sued  upon  the  covenants  in  his  deed. 

The  policy  is  not  transferable,  except  that  if  it  insures  a 
mortgagee  and  he  sells  the  mortgage,  his  rights  under  the 
policy  may  be  passed  to  his  assignee.  But  even  then  the  com- 
pany's consent  must  be  obtained. 

Should  there  be  a  loss  under  the  policy,  the  company,  having 
settled  the  claim,  acquires  all  the  rights  and  claims  of  the  in- 
sured against  any  other  person  who  is  responsible  for  the  loss. 
This  is  based  upon  the  legal  doctrine  of  subrogation.  The  title 
company  may  be  able  to  collect  all  or  part  of  the  loss  from  the 
person  who  caused  the  loss. 

In  any  case  where  the  company  has  paid  a  loss  totalling  the 
amount  of  the  policy,  it  reserves  the  right  to  take  over  the 
property  from  the  insured  at  a  fair  valuation.  There  is  a 
very  good  reason  for  this  provision.  In  some  instances  the 
title  is  defective,  but  can  with  time  and  effort  be  cured.  The 
company  in  such  an  event  pays  the  fair  value  to  the  insured, 
receiving  a  deed  from  him.  It  then  owns  the  property,  and  at 
its  pleasure  can  take  such  action  as  may  be  necessary  to  remove 
the  defects  in  the  title. 

Use  of  title  policy. — Of  course  the  insured  seldom  needs  to 
resort  to  his  policy  to  recover  a  loss.  But  he  should  always  refer 
to  it,  in  subsequent  transactions  with  reference  to  the  property. 
It  tells  him  at  once  just  what  property  he  owns  and  what  are  the 
encumbrances  on  it.  If  he  later  enters  into  a  contract  to  sell 
the  property,  he  should  use  the  description  in  the  policy  and 
undertake  to  give  a  title  subject  to  just  those  encumbrances 
stated  as  exceptions  in  the  policy. 


112    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

Necessity  for  survey. — The  examination  of  title  is  simply 
a  search  of  the  records,  revealing  who  appears  front  such  rec- 
ords to  be  the  owner  of  a  certain  particular  piece  of  property. 
This  search  often  shows  nothing  with  reference  to  the  physical 
condition  of  the  property.  For  example  the  report  of  title 
states  that  A  owns  the  lot  X  on  the  following  diagram 


First  Avenue 


20 

100 

§x§ 

1 

55 

20 

0 

N 


There  is  nothing  to  indicate  whether  the  land  is  vacant  or 
improved,  or  if  improved  how  the  buildings  stand  with  refer- 
ence to  the  lines. 

A  survey  is  necessary  for  this  purpose.  The  surveyor  being 
given  the  diagram  above,  taken  his  instruments  to  the  spot  and 
ascertains  the  exact  physical  condition.  He  then  furnishes  a 
map  of  the  lot  in  horizontal  projection  which  shows  not  only 
the  record  lot  lines  as  on  the  diagram  above,  but  indicates  the 
position  of  all  buildings,  fences  and  structures  of  any  kind 
standing  on  or  encroaching  upon  the  lot.  By  this  means  the 
person  dealing  with  the  property  knows  the  exact  amount  of 
the  land  and  the  relation  to  it  of  the  structures.  Important 
questions  of  marketability  of  title  may  depend  upon  the  con- 
ditions shown  by  the  survey. 

Encroachments  on  others. — The  building  on  the  lot  may 
cover  more  land  than  is  within  the  lot  lines.  Suppose  it  en- 
croaches on  the  highway.  The  street  is  either  owned  by  the 
municipality  or  else  it  has  an  easement  to  use  the  street  for  pub* 
lie  purposes.  In  either  event  no  one  has  a  right  to  encroach  upon 
it,  except  by  legal  permission.1  Such  an  encroachment  if  it 
be  by  a  permanent  structure  may  render  the  title  unmarketable. 
Likewise  the  building  may  encroach  upon  a  neighbor's  land. 
If  without  his  consent,  the  neighbor  may  be  able,  either  to 

1  Recent  decisions  of  the  supreme  court  of  New  York  have  made  it  questionable 
whether  the  municipal  authorities  of  New  York  City  have  authority  to  grant 
permission  for  any  encroachment  on  a  public  street. 


TITLE  AND  TITLE  INSURANCE  113 

recover  damages  for  the  encroachment  or  compel  the  removal 
of  so  much  of  the  building  as  encroaches  on  him.  A  purchaser 
could  not  be  compelled  to  accept  such  a  title.  The  survey  also 
would  indicate  party  walls.  It  should  also  be  examined  with 
reference  to  any  restriction  upon  the  property;  as  to  whether 
or  not  they  are  violated  by  the  building.  The  effect  of  such 
conditions  could  be  determined  only  by  one  familiar  with  the 
law  applicable  in  each  case. 

Encroachments  by  others. — The  building  may  stand  entirely 
upon  the  proper  lot  and  a  neighbor's  building  may  encroach. 
Of  course  the  title  to  so  much  as  is  not  encroached  upon  is 
marketable,  but  it  may  be  a  grave  question  of  whether  the  en- 
croachment does  not  affect  the  marketability  of  the  lot  as  a 
whole.  This  is  not  so  much  a  question  of  law  as  of  commercial 
utility,  and  the  courts  so  consider  it.  If  the  court  find  that 
the  encroachment  does  not  substantially  lessen  the  value  and 
extent  of  the  property,  it  will  compel  a  purchaser  to  accept  it. 
If  the  encroachment  does  substantially  lessen  the  value  and  ex- 
tent of  the  land,  the  purchaser  may  refuse  to  take  it,  or  he  may 
take  it,  and  be  given  an  allowance  for  the  land  lost  by  the 
encroachment. 

Survey  in  building  operations. — It  is  always  important 
that  a  new  structure  be  built  upon  its  own  lot,  and  particular 
care  should  be  taken  when  the  plans  call  for  a  building  to  run 
along  the  lot  line.  A  surveyor  should  be  employed  who  will 
locate  the  lot  lines  and  mark  the  corners.  The  builder  should 
then  keep  within  the  lines  indicated.  It  is  wise  to  have  the  sur- 
veyor survey  the  property  from  time  to  time  as  the  work  pro- 
gresses in  order  to  guard  against  encroachments  by  careless 
building,  such  as  leaning  or  bulging  walls. 

Survey  in  land  developments. — The  surveyor  is  always 
used  in  land  development  operations.  He  surveys  the  tract, 
locating  and  marking  by  monuments  or  stakes  the  streets  and 
blocks.  The  blocks  are  usually  laid  out  of  such  size  as  to  be 
easily  subdivided  into  lots.  A  map  is  then  prepared  showing 
all  the  streets,  blocks  and  lots.  As  the  lots  are  sold  it  is  a 
simple  matter  for  each  purchaser  to  locate  his  lot. 


CHAPTER  X 

CLOSING    OF    TITLE 

When  title  passes. — Title  to  property  passes  when  the  in- 
strument  of  conveyance  is  delivered.  This  is  not  necessarily 
the  date  of  execution.  The  instrument  may  have  been  signed 
long  before  the  day  of  delivery  but  no  title  is  passed  until  de- 
livery. In  the  absence  of  proof  to  the  contrary,  however,  the 
law  presumes  an  instrument  to  have  been  delivered  on  the  day 
it  is  executed.  To  make  a  legal  delivery,  the  grantor  must 
have  been  legally  competent  not  only  at  the  time  of  execution 
but  also  of  delivery;  that  is  he  must  have  been  of  legal  age  and 
of  sufficient  understanding  to  make  a  contract.  The  delivery 
must  be  voluntary  and  intentional.  An  owner  having  executed 
a  deed  of  his  property  might  retain  it  forever  and  no  title 
would  pass.  If  the  deed  were  stolen  from  him  the  thief  would 
obtain  no  rights  under  it.  A  deed  recorded  after  the  grantor's 
death  is  always  open  to  question,  upon  the  suspicion  that  it 
may  not  have  been  delivered  by  the  grantor. 

Delivery  in  escrow. — Occasionally  it  is  found  convenient 
to  make  a  conditional  delivery  of  the  deed.  For  example,  the 
seller  is  not  ready  at  the  closing  to  submit  proof  that  he 
has  paid  a  certain  lien  upon  the  property  and  it  would  be  in- 
convenient to  call  all  the  parties  together  again.  ''In  that  event 
the  deed  may  be  delivered  "in  escrow"  to  a  third  person  who 
acts  as  agent  for  both  seller  and  purchaser  and  who  is  author- 
ized to  deliver  the  deed  upon  receiving  proof  of  payment  of 
the  lien.  The  terms  of  the  agreement  under  which  the  deliv- 
ery is  made  should  be  very  carefully  drawn  specifying  exactly 
the  conditions  to  be  met  before  final  delivery  and  should  be 
signed  by  the  seller  and  purchaser. 

From  the  moment  however  that  the  instrument  is  legally 
delivered,  the  grantor's  rights  cease,  and  the  purchaser  be- 
comes from  that  instant  entitled  to  all  rights  conveyed  by 
the  instrument. 

The  title  closing. — The  contract  of  sale  or  exchange  desig- 
nates a  certain  day  and  hour  when,  and  place  where  the  deed 

114 


CLOSING  OF  TITLE  115 

shall  be  delivered  and  the  balance  of  the  price  shall  be  paid. 
This  transaction  between  the  seller  and  purchaser  and  their 
respective  representatives  is  known  as  the  "title  closing"  or 
"closing  of  title."  The  closing  is  the  consummation  of  the 
contract,  and  must  be  in  exact  accord  with  its  provisions. 
Hence  it  is  absolutely  necessary  that  a  copy  of  the  contract 
be  brought  to  the  closing.  The  purchaser  should  have  a  re- 
port of  title  showing  the  name  of  the  record  owner  and  a 
statement  of  the  encumbrances  on  the  property.  This  report 
should  be  brought  right  down  to  the  day  of  closing.  He  should 
also  have  money  to  pay  the  amount  required  by  the  contract, 
and  since  there  are  usually  adjustments  to  be  made  and  ex- 
penses to  be  paid,  he  should  bring  sufficient  extra  money  to 
cover  any  such  items.  The  seller  should  bring  his  latest  re- 
ceipts for  taxes,  water  rates  and  interest  on  the  mortgage  (if 
there  be  one),  also  all  insurance  policies  and  receipts  for  pay- 
ments on  account  of  the  principal  of  the  mortgage,  or  agree- 
ment extending  the  time  of  its  payment,  if  there  be  any.  (Ap- 
pendix forms  60  and  61.) 

Encumbrances  subject  to  which  the  purchaser  takes 
title. — The  report  of  title  furnished  by  the  examining  counsel 
or  the  title  company  probably  sets  forth  several  encumbrances. 
Some  of  these,  it  is  provided  in  the  contract,  shall  remain 
upon  the  property.  They  should  be  carefully  scrutinized  to 
see  that  they  are  not  other  or  more  extensive  than  the  con- 
tract provides.  If  the  report  of  title  shows  a  mortgage,  care 
should  be  taken  to  see  that  the  amount  unpaid  on  the  mort- 
gage, its  due  date,  interest  rate  and  interest  payment  dates 
are  in  accordance  with  the  terms  of  the  contract  If  the  con- 
tract provides  for  different  amount  or  terms  of  the  mortgage, 
the  purchaser  should  insist  upon  the  delivery  to  him  of  a 
written  statement  from  the  holder  of  the  mortgage,  executed 
and  proven  so  that  it  may  be  recorded,  stating  that  the  amount 
or  terms  of  the  mortgage  have  been  changed  and  are  now  as 
the  contract  specifies.  If  such  statement  be  not  delivered  the 
purchaser  is  entitled  to  an  opportunity  to  make  inquiry  of 
the  holder  of  the  mortgage. 

The  purchaser  is  interested  in  the  property  in  one  of  three 
ways;  for  an  investment,  for  his  own  use,  or  for  demolition 
to  make  room  for  a  new  structure.  In  any  case  the  rights 
of  the  tenants  are  of  great  importance.  If  the  property  is 


116    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

bought  as  an  investment  it  is  necessary  to  know  what  the  rent 
return  is.  If  it  is  acquired  for  the  purchaser's  own  use  or 
for  demolition,  the  length  of  the  tenants'  terms  of  occupancy 
will  determine  how  soon  possession  may  be  obtained  or  the 
building  torn  down.  For  these  reasons  all  leases  of  record 
should  be  carefully  examined  to  see  that  they  are  exactly  as 
provided  for  in  the  contract,  as  to  amount  of  rent,  date  it  is 
payable,  expiration  of  tenacy  and  all  other  details.  The 
purchaser  should  detect  any  provisions  in  the  leases  for  re- 
newal, rebate  of  rent,  special  repair  or  other  unusual  clauses. 
The  purchaser,  for  further  security,  would  do  well  to  go  to 
the  property,  before  the  closing,  and  interview  the  tenants, 
finding  out  what  each  claims  as  his  rights  in  the  property. 

All  restrictive  or  other  covenants  shown  upon  the  report 
of  title  should  be  examined  carefully.  They  might  be  of  such 
nature  as  to  materially  affect  the  use  of  the  property.  If  a 
survey  has  been  obtained  by  the  purchaser,  he  should  scrutin- 
ize it  to  see  if  the  building  violates  any  restrictive  covenants 
which  are  upon  the  property.  The  survey  will  also  show  any 
physical  conditions  of  the  structures  which  may  affect  the  title. 
Any  covenants  or  survey  variations  not  agreed  upon  in  the  con- 
tract may  be  waived  by  the  purchaser  if  he  deems  them  unim- 
portant. If  however,  they  materially  lessen  the  value  of  the 
property  the  purchaser  is  justified  in  refusing  to  take  title. 

Encumbrances  to  be  removed. — All  encumbrances  shown 
upon  the  report  of  title,  other  than  those  waived  by  the  pur- 
chaser or  which  the  contract  provides  are  to  remain,  must  be 
removed.  This  it  is  the  seller's  duty  to  do.  He  must 
deliver  a  title  free  and  clear  of  all  encumbrances  except  such 
as  are,  by  the  contract,  specifically  excepted.  Customarily  the 
purchaser,  as  soon  as  he  receives  his  report  of  title,  notifies  the 
seller  of  all  encumbrances  which  must  be  removed.  The  seller 
should  come  to  the  closing  prepared  to  remove  all  such  en- 
cumbrances. If  it  is  a  mortgage  which  is  to  be  satisfied,  he 
should  have  the  holder  present  with  a  satisfaction  piece  ready 
for  delivery.  The  same  arrangement  may  be  made  with  ref- 
erence to  a  judgment  which  is  a  lien.  Often  for  convenience 
the  mortgagee  or  holder  of  the  judgment  gives  a  statement 
of  the  amount  due  him,  and  the  purchaser  or  his  attorney  holds 
out  that  amount  from  the  price,  going  to  him  after  the  closing, 
paying  the  amount  stated  and  receiving  the  satisfaction  piece. 
If  a  title  company  closer  is  closing  the  title,  it  is  customary 


CLOSING  OF  TITLE  117 

for  him  to  hold  the  money  for  this  purpose  and  secure  the 
satisfaction  piece.  Very  often  the  property  is  subject  to  the 
lien  of  unpaid  taxes.  It  is  usual  then  for  the  purchaser  or 
his  representative  to  hold  out  an  amount  sufficient  to  pay  them. 
They  are  later  paid  by  him  and  any  surplus  returned  to  the 
seller. 

Instruments  to  be  delivered. — The  contract  provides  for 
the  delivery  of  certain  instruments.  If  a  sale,  there  is  a  deed 
and  often  a  bond  and  purchase  money  mortgage.  These 
should  be  carefully  examined  to  see  that  they  are  in  accord  with 
the  contract;  the  deed  that  it  conveys  the  proper  estate,  suf- 
ficiently describes  the  property  and  is  in  the  form  provided  in 
the  contract;  the  bond  and  mortgage  that  they  are  for  the 
agreed  amount  and  upon  the  terms  set  forth  in  the  contract. 
They  should  then  be  signed  and  acknowledged  and  finally 
scrutinized  to  see  that  the  execution  is  proper.  It  is  usual 
also  to  have  the  seller  execute  what  is  known  as  an  "affidavit 
of  title, "  by  which  he  swears  to  the  fact  that  he  owns  the  prop- 
erty, states  how  long  he  has  owned  it,  that  no  one  has  made 
any  claim  to  it,  that  his  title  has  never  been  questioned,  that 
there  are  no  liens  upon  it  except  such  as  are  specifically  men- 
tioned and  that  there  are  no  judgments  against  him. 

Adjustments. — Upon  the  title  being  closed  the  seller's 
rights  cease  and  the  purchaser  at  once  becomes  entitled  to  every 
interest  in  the  property.  It  is  not  practicable  for  the  seller 
to  settle  and  pay  all  his  accounts  respecting  the  property;  it 
is  much  more  convenient  to  adjust  between  seller  and  buyer 
such  items  as  rents,  insurance  premiums  and  mortgage  inter- 
est. The  contract  usually  provides  for  an  adjustment  of  those 
items  and  may  include  others.  Customarily  the  adjustment 
is  made  as  of  the  date  of  closing  title,  but  the  contract  may  set 
another  date. 

The  adjustments  are  made  in  the  form  of  a  debit  and  credit 
account;  the  credit  column  containing  all  the  items  for  which 
the  seller  is  entitled  to  credit,  and  the  debit  column  all  items 
for  which  the  purchaser  is  entitled  to  credit.  For  an  illustra- 
tion: 'suppose  'the  property  Were  being  sold  for  $20,000; 
$1,000  paid  on  signing  contract;  $4,000  to  be  paid  on  closing; 
the  purchaser  to  take  title  subject  to  an  existing  mortgage  of 
$10,000  with  interest  at  5  per  cent  per  annum,  payable  semi- 
annually,  the  last  interest  having  come  due  and  been  paid  two 


118    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

months  before  the  closing  of  title;  the  balance  of  the  price,  to 
be  paid  by  a  bond  and  purchase  money  mortgage  for  $5,000. 
The  property  is  rented  to  a  tenant  who  pays  $200  per  month 
rent  in  advance,  and  whose  rent  was  due  and  paid  on  the  first 
of  the  month  in  which  title  is  closed  on  the  15th.  There  is 
a  fire  insurance  policy  upon  the  property  for  three  years;  pre- 
mium $36  which  was  issued  14  months  prior  to  the  closing 
of  title. 

In  this  illustration  the  first  credit  is  the  total  selling  price: 
$20,000.  The  next  credit  is  for  unexpired  insurance.  The 
policy  was  paid  for  in  advance  by  the  seller  and  has,  at  the 
time  of  closing  22  months  still  to  run.  If  the  seller  cancelled 
the  policy,  he  would  receive  a  refund  from  the  insurance  com- 
pany of  less  than  the  unexpired  value,  computed  on  a  pro- 
rate basis.  Hence  the  contract  provision  for  an  adjustment 
of  this  item.  The  premium  being  at  the  rate  of  $1  per  month 
entitles  the  seller  to  a  credit  of  $22  for  the  unexpired  term  of 
the  policy.  Another  credit  to  which  the  seller  is  sometimes 
entitled  arises  in  case  of  a  postponement  of  the  closing  at  the 
purchaser's  request.  In  such  events  the  postponement  is  often 
conditioned  upon  the  purchaser  paying  interest  on  the  pur- 
chase price  from  the  original  date  set  for  closing;  the  amount 
of  interest  would  then  be  placed  in  the  column  of  seller's 
credits. 

The  purchaser's  first  credit  is  the  amount  paid  on  signing  of 
the  contract:  $1,000.  Next  he  receives  credit  for  the  amount 
of  the  existing  mortgage:  $10,000.  Two  months'  interest  on 
the  mortgage  has  accrued  up  to  the  date  of  closing  and  since 
the  interest  is  payable  semi-annually  there  will  be  a  full  six 
months  of  interest  due  four  months  after  closing,  which  the 
purchaser,  being  then  the  owner,  will  have  to  pay.  So  he  de- 
ducts the  seller's  share  of  the  interest  from  the  purchase 
price  by  crediting  himself  with  one-third  of  the  sum  of  $250 
the  interest  for  six  months:  $83.33.  The  bond  and  purchase 
money  mortgage  for  $5,000  being  given  for  part  of  the  price 
entitles  the  purchaser  to  a  credit  for  that  amount.  The  final 
credit  he  receives  has  to  do  with  the  rent.  The  tenant  has  paid 
the  seller  $200,  rent  for  the  month.  Title  being  closed  in  the 
middle  of  the  month,  the  seller  should  turn  over  to  the  pur- 
chaser one-half  of  this  amount.  This  is  accomplished  by  the 
purchaser  taking  a  credit  for  $100. 


CLOSING  OF  TITLE  .    119 

The  adjustments  as  finally  computed  would  appear  as  fol- 
lows: 

Dr.  Cr. 

Total  price  $20,000.00 

Paid  on  contract $  1,000.00 

Existing  mortgage 10,000.00 

Interest  at  5  per  cent  for  2  months 83.33 

Purchase  money  mortgage 5,000.00 

Insurance  adjustment 22.00 

Rent  one-half  month 100.00 


Total  debits   $16,183.33 


Total  credits    $20,022.00 

16,183.33 


Balance  due  from  purchaser $3,838.67 

The  purchaser  therefore  after  the  adjustments  are  made 
owes  and  must  pay  to  complete  the  transaction,  the  sum  of 
$3,838.67.  It  is  probable  that  the  contract  in  the  illustrated 
case  provided  that  the  purchaser  should  pay  for  drawing  the 
bond  and  purchase  money  mortgage,  the  recording  fee,  re- 
cording tax  (if  any)  and  for  revenue  stamps  on  the  bond. 
The  purchaser  will  be  required  to  pay  an  additional  sum  to 
cover  these  items.  Should  there  be  any  taxes  a  lien  upon  the 
property,  the  purchaser,  since  he  desires  to  be  certain  they  are 
paid,  will  usually  deduct  their  amount  from  the  balance  he 
owes,  and  pay  them  himself.  In  the  same  way  the  purchaser 
would  deduct  an  amount  sufficient  to  cover  any  mortgage  or 
judgment  which  is  to  be  satisfied. 

It  is  customary  to  compute  time  upon  a  basis  of  a  360  day 
year  and  30  day  month,  unless  a  considerable  sum  is  involved, 
in  which  case  often  the  exact  number  of  days  is  used.  In 
counting  the  number  of  days  in  a  certain  period,  the  first  day 
is  excluded  and  the  last  day  added.  For  example,  To  figure 
interest  for  a  period  of  days,  the  amount  due  for  one  month 
is  divided  by  30  and  multiplied  by  the  number  of  days.  The 
period  from  February  1st  to  March  15th  would  be  figured  as 
1  month  and  14  days.  Interest  unless  otherwise  specified  is 
figured  at  the  maximum  legal  rate. 

It  is  usual  to  incorporate  the  statement  of  adjustments  into 
a  "Statement  of  closing  of  title."  (Appendix  form  66.) 


120    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

This  contains,  in  addition  to  the  memorandum  of  adjustments, 
a  notation  of  the  date  of  closing,  and  place,  the  names  of  those 
present  and  the  details  of  all  instruments  delivered.  It  is 
valuable  for  future  reference  in  event  of  dispute.  When  the 
title  is  examined  by  a  title  company,  and  closed  by  its  repre- 
sentative, he  usually  prepares  the  closing  statement. 

Closing  exchanges,  leaseholds  and  loans. — The  statement 
of  adjustments  in  the  closing  of  an  exchange  is  similar  to  that 
in  a  sale  except  that  there  are  a  double  set  of  debit  and  credit 
items.  Each  party  is  charged  with  the  price  of  the  property 
he  receives.  Each  is  credited  with  the  amount  of  mortgage, 
accrued  interest  and  rent  adjustment  upon  the  property  he 
receives.  Sometimes  if  there  be  a  difference  in  the  agreed 
value  of  the  properties,  instead  of  charging  each  with  the  price 
of  the  property  he  receives,  merely  the  difference  is  stated  as  a 
charge  against  the  proper  party.  If  there  is  no  difference  in 
the  agreed  price,  they  need  not  be  stated  in  the  adjustments. 

In  closing  sales  of  leaseholds,  the  purchaser  is  not  buying 
the  land  but  only  the  lease.  He  should  therefore  examine 
carefully  the  terms  of  the  lease  which  he  is  purchasing  and 
know  exactly  the  claims  and  rights  of  sub-tenants,  if  there  be 
any.  The  items  to  be  adjusted  will  consist  usually  of  the 
ground  rent  paid  to  the  owner  of  the  land  and  rents  paid  by 
sub-tenants.  The  seller  is  entitled  to  credit  pro  rata  for  ground 
rent  he  has  paid  in  advance  or  should  be  charged  in  the  same 
manner  if  there  be  ground  rent  accrued  and  unpaid.  The  pur- 
chaser should  be  credited  with  his  proportion  of  sub-tenant's 
rent  paid  in  advance  and  also  any  deposits  they  may  have  paid 
as  security. 

Upon  the  closing  of  mortgage  loans  there  are  practically  no 
adjustments  to  be  made.  The  borrower  pays  all  expenses,  in- 
cluding examination  of  title,  preparation  of  bond  and  mortgage 
and  recording  fees.  The  lender  simply  advances  the  amount 
of  the  loan.  The  bond  and  mortgage  should  be  carefully  ex- 
amined to  see  that  they  are  in  accordance  with  the  terms  agreed 
upon,  and  that  they  are  properly  executed. 

Rejection  of  title. — If  the  seller  is  unable  to  deliver  a  title 
substantially  such  as  he  agreed  to  give  in  his  contract,  the  pur- 
chaser may  reject  the  title.  He  is  then  entitled  to  the  return 
of  the  deposit  he  paid  on  the  signing  of  the  contract,  together 
with  interest  at  the  legal  rate  from  the  time  he  made  the  pay- 


CLOSING  OF  TITLE  121 

ment  to  the  time  it  is  repaid  to  him.  He  is  entitled  also  to  be 
compensated  for  such  reasonable  expense  as  he  may  have  in- 
curred in  the  examination  of  the  title.  He  can  recover  as  dam- 
ages a  lost  profit  on  the  transaction  only  in  case  the  seller  was 
guilty  of  a  fraud  or  should  have  known  the  title  was  defective. 
The  purchaser's  remedies  are  more  fully  discussed  at  page  60. 


CHAPTER  XI 
LEASES 

Landlord  and  tenant. — Persons  or  corporations  owning 
real  property  permit  others  to  hire  it  and  charge  them  for  its 
use,  the  object  of  the  owner  being  usually  to  derive  an  income 
or  profit  from  the  property.  Out  of  the  agreement  between 
the  parties  grows  the  relationship  of  landlord  and  tenant.  The 
landlord  is  the  one  letting  the  property,  the  other  hiring  it  and 
agreeing  to  pay  rent,  being  known  as  the  tenant.  The  landlord 
is  usually  the  owner  of  the  property  but  not  necessarily;  he  may 
himself  be  the  tenant  of  the  owner,  letting  the  premises  to  his 
own  sub-tenants. 

Leases. — The  agreement  under  which  the  tenant  hires  the 
property  from  the  landlord  is  known  as  the  lease.  It  is  the 
agreement  under  which  the  tenant  goes  into  possession  and 
specifies  how  long  the  possession  shall  continue  and  the  amount 
which  shall  be  paid  the  landlord  for  the  use  of  the  property. 
The  time  for  which  the  tenant  may  hold  possession  is  known  as 
the  "term."  The  amount  reserved  to  the  landlord  is  known  as 
"rent."  A  lease  may  be  merely  a  verbal  letting  agreement  for 
a  short  term,  or  it  may  be  a  lengthy  document  containing  many 
special  provisions  and  covenants. 

Rent. — Rent  has  been  defined  as  a  definite  periodical  return 
for  the  use  of  land.  It  may  be  payable  in  money,  or  it  may  be 
payable  in  the  produce  of  the  land.  The  amount  of  rent  need 
not  be  definitely  fixed  in  advance  but  it  must  be  capable  of  being 
made  definite  at  some  time.  For  example,  leases  may  be  made 
having  the  rent  fixed  as  a  certain  share  of  the  crop  to  be  raised 
on  the  land — when  the  crop  is  harvested  the  amount  of  rent 
is  known.  Store  property  is  sometimes  leased  with  a  provision 
that  the  landlord  shall  receive  a  fixed  sum  of  rent,  plus  a  per- 
centage of  the  tenants'  gross  receipts  above  an  agreed  amount. 
This  additional  sum  is  part  of  the  rent,  the  total  rent  being 
determined  when  the  results  of  the  tenant's  business  is  known. 

Rent  must  also  be  periodical — that  is,  it  is  payable  at  regular 
recurring  intervals,  so  much  payable  in  one  sum  for  the  term, 
or  so  much  each  week,  month  or  year  of  the  term. 

There  is  a  danger  in  giving  possession  of  property  without 
establishing  a  tenancy.  A  purchaser  of  real  estate  who  enters 
into  possession  of  the  property  he  is  buying  under  a  contract 

122 


LEASES  123 

of  sale,  and  before  delivery  of  the  deed,  is  not  a  tenant,  unless 
he  is  made  so  by  express  agreement.  Because  of  the  delay  and 
expense  of  an  eviction  action,  it  is  advisable  to  establish  the 
nominal  relationship  of  landlord  and  tenant  in  such  cases.  This 
is  accomplished  by  a  letting  agreement  between  the  parties  in 
which  the  term  and  rental  is  specified.  This  may  be  a  separate 
instrument,  but  is  often  contained  as  a  special  clause  in  the 
contract  of  sale.  (Appendix  form  12.) 

Janitors  are  employees  and  often  receive  the  use  of  an 
apartment  as  part  of  their  wages.  It  is  usually  advisable  to 
have  the  employee  sign  an  agreement  for  the  use  of  the  apart- 
ment at  a  nominal  rental.  If  he  is  ever  discharged,  the  letting 
agreement  can  be  terminated  and  possession  of  the  apartment 
secured  through  a  dispossess  proceeding. 

Term  of  lease. — There  is  no  legal  limitation  upon  the  term 
of  a  lease.1  It  may  be  for  one  day,  or  it  may  be  for  999  years. 
It  is  customary  in  New  York  State,  however,  to  make  long 
term  leases  run  for  a  period  of  twenty-one  years,  with  pro- 
vision for  one  or  more  renewals  at  similar  terms.  The  reason 
for  this  is  that  under  the  tax  law  of  the  State,  the  rent  payable 
under  leases  for  more  than  twenty-one  years  may  be  taxed  as 
personal  property  to  the  one  entitled  to  receive  it,  and  this 
tax  is  in  addition  to  the  ordinary  tax  on  the  land.  The  object 
of  this  provision  of  the  tax  laws  is  to  prevent  the  tying  up  of 
land  on  long  leases. 

Regardless  of  the  length  of  the  term,  the  right  of  the  tenant 
to  use  the  leased  premises  is  personal  property,  his  holding 
being  a  leasehold.  The  right  of  an  owner  to  receive  the  rent 
and  to  resume  possession  at  the  end  of  the  lease  is  real 
property.2 

Verbal  and  written  leases. — Under  the  Statute  of  Frauds 
in  New  York,  leases  for  more  than  one  year  must  be  in  writ- 
ing and  subscribed  by  the  party  to  be  charged.  It  follows 
then  that  leases  for  terms  up  to  one  year  may  be  verbal. 
With  regard  to  written  leases,  it  is  important  that  the  agree- 
ment clearly  express  all  of  the  terms  of  the  lease  as  the 
writing  will  control  over  claims  regarding  a  verbal  under- 
standing of  any  matter  relating  to  the  letting.  Leases  of 
three  years  or  more  may  be  recorded  under  the  New  York 

*An  exception  to  this  in  New  York  is  that  leases  of  agricultural  lands  shall 
be  for  periods  not  longer  than  twelve  years  (N.  Y.  State  Constitution,  Art  I. 
Sec.  13.) 

2  The  provision  of  the  New  York  State  Tax  law  concerning  taxation  of  rent 
received  under  leases  for  more  than  21  years  was  repealed  in  1923. 


124   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

Statute.  The  laws  of  other  States  differ  as  to  the  length 
of  time  for  which  a  verbal  lease  may  be  made  and  also  as 
to  the  term  of  recordable  leases. 

Possession  of  real  property  is  actual  notice  of  the  occu- 
pant's claim  upon  it,  and  for  this  reason  the  recording  of 
a  lease  is  not  always  important.  Failure  to  find  a  lease  on 
record  is  not  conclusive  evidence  that  the  tenant's  lease  is 
a  short  one. 

Monthly  tenancies. — A  monthly  tenancy  is  one  made  for  a 
month  only.  It  is  self-renewing,  however,  from  month  to 
month  unless  notice  is  given  by  the  landlord  to  the  tenant 
of  his  intention  to  terminate  it.  The  tenant  need  give  no 
notice  but  may  remove  at  the  end  of  any  month.  At  one 
time  in  New  York,  the  notice  required  to  be  given  by  a  land- 
lord was  five  days.  This  was  later  increased  to  twenty  days 
and  more  recently  to  the  present  requirement  of  thirty  days. 
After  notice  to  quit  has  been  given  by  a  landlord  the  tenant 
who  fails  to  remove  is  known  as  a  hold-over  tenant  and  a 
summary  proceeding  to  recover  possession  can  be  brought 
against  him. 

In  New  York  State,  by  a  recent  decision  a  distinction  has 
been  made  between  a  monthly  tenancy  and  a  month  to  month 
tenancy.  The  latter  has  been  held  to  be  strictly  a  tenancy 
for  the  month  only,  but  self-renewing  unless  notice  to  quit  has 
been  given.  On  the  other  hand,  the  monthly  tenancy  is  con- 
sidered to  be  one  made  for  an  indefinite  period  but  calling 
for  installments  of  rent  payable  monthly. 

In  States  other  than  New  York,  it  is  a  rule  that  notice  to 
quit  is  coincident  with  the  length  of  the  period  of  tenancy 
and  also  that  the  requirement  of  notice  is  reciprocal. 

Indefinite  tenancies. — Many  tenancies  are  made  for  in- 
definite periods  and  are  known  as  tenancies  at  will.  The  ten- 
ant goes  into  possession  under  an  agreement,  usually  verbal, 
to  pay  a  certain  rent  periodically,  but  no  term  is  stated.  The 
agreement  can  be  terminated  upon  one  month's  notice  by  either 
party.  A  tenancy  by  sufferance  has  also  been  recognized  but 
this  is  usually  only  an  express  or  implied  license  to  use  the 
property  at  the  pleasure  of  the  landlord. 

Tenancy  for  term  of  year  or  years. — A  tenancy  more  im- 
portant than  the  monthly,  and  at-will  tenancy,  is  one  for  a 
definite  term  of  a  year  or  longer.  The  necessity  for  having 


LEASES  125 

such  agreements  in  writing  is  governed  by  the  statutes  of 
the  State  in  which  the  property  is  located. 

The  tenancy  for  a  year  ends  without  notice  on  the  last 
day  of  the  term  of  the  lease.  If  the  tenant  continues  in 
possession,  he  is  a  hold-over.  The  landlord  can  dispossess 
him  as  such,  or  he  can  elect  to  hold  him  for  a  further  period 
of  one  year.  The  landlord  may,  however,  give  notice  to  a 
tenant  that  if  he  continues  in  possession,  it  is  as  a  monthly 
tenant  only.  In  the  absence  of  a  notification  of  this  kind, 
the  acceptance  of  rent  by  the  landlord  from  a  hold-over  is 
usually  construed  as  a  renewal  of  the  lease  by  the  landlord 
for  one  year,  and  this  is  regardless  of  the  number  of  years 
in  the  term  of  the  original  lease. 

Ground  lease. — A  ground  lease  is  one  made  for  the  rental 
of  a  parcel  of  unimproved  land  for  a  term  of  years.  The 
agreement  usually  contains  the  provision  that  a  building  shall 
be  erected  on  the  land  by  the  tenant.  It  frequently  con- 
tains a  further  provision  regarding  the  disposition  of  the 
building  at  the  end  of  the  term.  The  building  although 
erected  at  the  expense  of  the  tenant  legally  becomes  real 
property  and  is,  therefore,  unless  otherwise  provided,  the 
property  of  the  landlord,  subject,  however,  to  the  tenant's 
right  of  possession  for  the  term  of  the  lease.  In  order  that 
the  tenant  get  back  the  cost  of  the  building,  the  lease  must 
provide  that  the  landlord,  at  the  expiration  of  the  term,  shall 
pay  the  tenant  all  or  part  of  the  cost  or  appraised  value  of 
the  building,  or  in  the  absence  of  such  a  provision,  the  term 
of  the  lease  or  the  renewal  privileges,  must  give  the  tenant 
sufficient  time  to  amortize  the  entire  cost  of  the  building 
during  the  period  of  his  occupancy.  Ground  rent  is  often 
computed  on  the  basis  of  a  certain  percentage  of  the  value  oi: 
the  land.  The  tenant  pays  all  taxes  and  other  charges,  the 
landlord's  rent  being  net.  In  order  that  the  landlord  obtain 
the  benefit  of  an  increasing  land  value,  it  may  be  provided 
that  with  each  renewal  of  the  lease  a  re-appraisal  of  the  land 
be  made  and  the  rent  increased  proportionately.  It  may  be 
provided  that  at  the  end  of  a  term,  the  landlord  may  either 
pay  the  tenant  for  the  building,  or  renew  the  lease  at  his 
option.  There  are  no  set  rules  which  govern  leases  of  this 
kind,  each  bargain  being  consummated  upon  negotiations  by 
the  parties  concerned.  The  provisions  above  mentioned  are 
merely  suggestive  of  what  may  be  agreed  upon. 


126   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

The  problem  of  the  tenant  erecting  a  building  on  leased 
ground  is  either  to  use  it  for  himself,  or  to  sub-let  it  to  ten- 
ants, his  own  rent  or  the  rent  he  obtains  from  sub-tenants 
being  sufficient  to  make  the  operation  profitable.  He  must 
figure  that  the  building  rent  will  cover  the  following  items: 

(a)  The  ground  rent  payable  to  the  owner. 

(b)  Taxes  of  all  kinds,  and    assessments    for    local    im- 
provements. 

(c)  Premiums   on   policies   of   insurance   against  fire,   lia- 
bility,    workmen's     compensation     and     plate     glass, 
charges  for  water,  heat,  light  and  power. 

(d)  Labor  and  repairs,   including  all  charges  for  upkeep 
and  maintenance  and  service  to  tenants. 

(e)  Interest  on  capital  invested,  that  is,  on  the  amount 
expended  in  erection  of  building. 

(f)  An  amount  sufficient  to  amortize  the  cost  of  the  build- 
ing during  the  term  of  the  lease  or  by  the  end  of  the 
last  renewal  of  the  lease. 

(g)  A  sufficient  amount  over  and  above  all  the  foregoing 
charges  to  compensate  the  operator   for  his  services 
and  the  risk  involved  in  the  enterprise. 

In  computing  the  rent  expected  to  be  realized  from  the 
building  provision  must  be  made  for  vacancies  and  losses 
through  bad  debts. 

Termination  of  leases. — Leases  may  be  terminated  by  any 
one  of  the  following  events: 

(a)  Expiration  of  term  of  lease. 

(b)  Surrender  and  acceptance,  either  express  or  implied. 

(c)  Breach  of  conditions  of  the  lease. 

(d)  Constructive  eviction  of  the  tenant. 

(e)  Exercise  of  right  of  eminent  domain. 

(f)  Destruction  of  property. 

It  has  already  been  noted  that  leases  for  years  end  on  the 
last  day  of  their  term  without  notice  and  that  monthly  ten- 
ancies and  tenancies  at  will  are  self-renewing  or  continuing 
until  notice  of  termination  has  been  given.  Prior  to  the  end 
of  the  term  of  a  lease  the  tenant  may  offer  to  surrender  pos- 
session of  the  premises  to  the  landlord  and  if  such  offer  is 
accepted  the  lease  is  terminated.  This  may  be  done  verbally 
even  though  the  lease  be  written  as  the  act  of  the  landlord 
in  taking  possession  shows  that  the  obligations  under  the  lease 


LEASES  127 

have  ended.  If  a  lease  has  been  recorded  it  is  advisable  to 
have  the  surrender  agreement  reduced  to  writing,  signed, 
acknowledged  and  recorded. 

The  surrender  of  a  lease  and  the  acceptance  of  the  sur- 
render may  be  implied  by  the  acts  of  the  parties.  The  mere 
quitting  or  abandonment  of  the  premises  by  the  tenant  and 
re-entry  by  the  landlord,  even  though  nothing  be  said,  may 
be  construed  to  be  such  an  implication.  To  avoid  the  danger 
of  the  landlord  accepting  a  surrender  against  his  will  or  in- 
tention, it  is  advisable  to  have  the  lease  so  drawn  that  the 
landlord  may,  to  protect  the  property,  re-enter  as  the  agent 
of  the  tenant. 

A  breach  of  conditions  may  terminate  the  lease.  The 
conditions  of  a  lease  may  be  divided  into  two  classes,  those 
for  which  the  landlord  can  dispossess  the  tenant  by  summary 
proceeding  and  those  for  which  he  cannot  bring  summary 
proceedings. 

Summary  or  dispossess  proceedings  can  only  be  brought  for 
(a)  non-payment  of  rent,  (b)  holding  over  at  end  of  the 
term,  (c)  for  unlawful  use  of  the  premises,  (d)  for  non- 
payment of  taxes  and  assessments  when  under  the  terms  of 
the  lease  the  tenant  undertook  to  pay  them,  (e)  when  the 
tenant  takes  the  benefit  of  an  insolvent  act  or  is  adjudged  a 
bankrupt,  provided  his  lease  was  made  for  a  term  of  three 
years  or  less.  For  breach  of  other  conditions  of  a  lease  pos- 
session can  be  obtained  only  by  means  of  a  lengthy  and  ex- 
pensive ejectment  action.  An  important  lease,  however,  if 
properly  drawn,  will  contain  provisions  which  will  bring  every 
condition  and  covenant  into  the  class  for  which  summary  dis- 
possess may  be  obtained.  (Appendix:  form  69.)  It  will 
provide  that  additional  charges,  such  as  taxes,  insurance 
premiums,  water  charges,  expenses  of  repairs  and  altera- 
tions; in  fact  anything  for  which  settlement  is  made  in  money, 
and  for  which  the  tenant  is  liable,  may  be  paid  by  the  land- 
lord and  the  sum  so  paid  become  additional  rent.  The  lease 
will  also  provide  that  the  term  is  conditioned  upon  perform- 
ance of  the  covenants  and  conditions  on  the  part  of  the  tenant 
and  this  provision  will  give  the  landlord  .the  right  to  notify 
the  tenant  that  he  elects  to  end  the  term  of  the  lease  at  a  fixed 
time.  In  other  words,  there  is  a  "conditional  limitation"  on 
the  term.  The  failure  of  the  tenant  to  pay  the  charges  which 
have  become  additional  rent,  or  the  holding  over  of  the  tenant 


128    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

after  termination  under  the  landlord's  option  because  of 
breach  of  conditions,  permits  the  landlord  to  obtain  posses- 
sion through  the  ordinary  dispossess  proceeding. 

Constructive  eviction  occurs  when  the  leased  premises  be- 
come in  such  a  physical  condition,  due  to  some  act  or  omission 
of  the  landlord,  that  the  tenant  is  unable  to  occupy  them  for 
the  purpose  intended.  No  claim  of  constructive  eviction  will 
be  allowed  unless  the  tenant  actually  removes  from  the  prem- 
ises. If  he  so  removes  and  can  prove  his  case,  the  lease  is 
terminated.  He  may  also  be  able  to  recover  damages  for  the 
landlord's  breach  of  the  covenant  of  quiet  enjoyment. 

There  may  be  eviction  of  this  kind  from  a  portion  of  the 
premises  only,  but  as  a  lease  is  an  entire  contract,  the  tenant 
can  take  advantage  of  this  and  remove  from  the  entire  prem- 
ises, or  he  can  retain  possession  of  the  remainder  and  refuse 
to  pay  rent  until  restored  to  possession  of  the  entire  premises. 

The  tenant's  contention  of  constructive  eviction  must  rest 
upon  some  act  or  omission  of  the  landlord  by  which  the  tenant 
was  deprived  of  the  use  of  the  property  for  the  purpose  or 
in  the  manner  contemplated  by  the  lease.  The  erection  by 
the  landlord  of  a  building  on  adjoining  property  as  a  result 
of  which  the  tenant's  light  was  diminished  would  not  be  con- 
structive eviction,  but  the  storage  of  materials  on  the  side- 
walk in  front  of  the  tenant's  premises  for  a  period  of  time 
may  interfere  with  his  use  of  the  premises  to  such  an  extent 
that  constructive  eviction  could  be  proved.  Failure  of  the 
landlord  to  furnish  steam  heat  or  other  facility  contemplated 
by  the  lease  usually  amounts  to  constructive  eviction. 

When  leased  property  is  taken  for  public  purposes  under 
the  right  of  eminent  domain,  leases  on  it  terminate.  The 
tenant  is  given  an  opportunity  to  prove  the  value  of  the  un- 
expired  term  of  his  lease  in  the  proceeding  under  which  the 
property  is  taken  and  may  receive  an  award  for  it. 

While  under  the  common  law  the  destruction  of  a  building 
by  fire  or  otherwise  would  not  terminate  a  lease,  nor  relieve 
the  tenant  of  his  liability  to  pay  rent,  practically  all  of  the 
States  have  passed  laws  which  provide  that  in  case  of  the 
destruction  of  the  entire  property,  the  tenant  may  remove 
immediately  after  the  destruction  and  the  lease  is  thereupon 
terminated. 

Dispossess  proceedings. — The  right  to  recover  possession 
from  a  tenant  through  the  summary  proceeding  known  as 


LEASES  129 

dispossess  is  one  given  by  statute  and  is  not  a  common  law 
right.  The  action  is  brought  in  courts,  of  minor  jurisdiction, 
that  is  to  say,  courts  of  justices  of  the  peace  in  country  dis- 
tricts and  city  or  municipal  courts  in  cities.  A  petition  is 
prepared  reciting  the  tenancy  and  setting  forth  the  cause  of 
action  and  praying  the  court  for  a  warrant  of  dispossess.  The 
tenant  must  be  notified,  either  personally  or  through  some 
member  of  his  family,  or  by  posting  the  notice  on  the  leased 
premises.  There  is  a  return  day  at  which  time  the  tenant 
may  appear  and  answer.  The  court  may  not  grant  the  peti- 
tion— it  may  give  judgment  to  the  tenant.  If  the  tenant 
does  not  answer,  or  if  the  court  decides  against  him,  judgment 
is  given  to  the  landlord  and  a  warrant  of  dispossess  is  issued 
immediately.  As  a  matter  of  compassion  the  court  may  stay 
the  warrant  for  a  short  time  and  in  a  case  of  distress,  such 
as  serious  illness  in  the  tenant's  family,  there  can  be  little 
objection  to  a  reasonable  delay.  The  tenant  who  does  not 
peaceably  remove  after  the  warrant  has  been  issued,  may, 
with  his  belongings,  forcibly  be  removed  by  a  marshal  or  other 
public  official. 

Emergency  rent  laws. — The  three  causes  for  which  dis- 
possess may  be  principally  granted  have  already  been  stated. 
They  are  non-payment  of  rent,  holding-over  at  end  of  term 
and  unlawful  use  of  the  premises.  In  New  York  and  certain 
other  jurisdictions,  the  right  of  dispossess  was  recently 
greatly  abridged  because  of  circumstances  which  the  legisla- 
ture has  deemed  to  "constitute  an  emergency."  The  emer- 
gency came  about  through  lack  of  construction  of  buildings 
for  housing  purposes  during  the  period  of  the  World  War. 
Inasmuch  as  public  interests  are  superior  to  the  interests  of 
the  owners  of  such  buildings,  the  legislature  felt  it  necessary 
to  guard  against  wholesale  evictions  by  landlords  of  prem- 
ises occupied  for  dwelling  purposes.  A  summary  of  the  most 
important  of  these  New  York  laws  is  as  follows: 

1.  Recovery  from  hold-over  tenants  of  premises  occupied 
for  dwelling  purposes  is  prevented  except  in  the  following  cases : 

(a)  Tenant  is  objectionable. 

(b)  When   premises   are   required   for  immediate  use  by 
owner  or  his  family. 

(c)  When  building  is  to  be  demolished  to  erect  new  build- 
ing and  plans  for  new  building  have  been  filed  and 
approved. 


130    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

(d)  When  individual  stockholder  in  co-operative  apart- 
ment plan  requires  possession  for  his  own  use.  Entire 
stock  of  corporation  must  be  owned  by  persons  who 
are  to  occupy  portions  of  the  building. 

2.  Prevent  recovery  of  possession  for  non-payment  of  rent 
if  the  amount  of  rent  is  unjust  and  unreasonable  and  if  the 
agreement  under  which  recovery  is  sought  is  oppressive. 

The  landlord  may  recover  a  fair  and  reasonable  rent  but 
is  required  to  file  a  bill  of  particulars  showing  income,  ex- 
penses, assessed  valuation,  the  consideration  paid  for  the 
property  and  the  encumbrances,  and  such  other  facts  he  may 
claim  affect  the  net  income.  By  amendment,  the  law  provides 
that  the  tenant  cannot  plead  unreasonableness  if  he  has  paid 
rent  under  the  agreement  for  three  successive  months.  He 
is  also  required  to  deposit  the  monthly  rent  with  the  clerk  of 
the  court  during  the  pendancy  of  the  action. 

3.  It  has  been  made  a  misdemeanor  not  to  furnish  hot  or 
cold  water,  heat,  light,   power,  elevator,  telephone  or  other 
service  when  the  terms   of  the   lease,   expressed   or  implied 
required  that  such   facilities  be  furnished. 

4.  The  provisions  as  to  premises  used   for  dwelling  pur- 
poses do  not  apply  to  hotels,  rooming  or  lodging-houses. 

Form  of  lease. — The  essential  parts  of  a  lease  are  the 
premises,  term,  amount  of  rent  and  manner  of  payment,  and 
the  covenants  and  conditions  agreed  upon.  The  agreement  is 
made  between  two  or  more  parties  known  as  lessoi  and  lessee 
(or  landlord  and  tenant).  A  written  lease  will  usually  be 
dated  and  signed  by  both  parties.  Seals,  witnessing  and 
acknowledgments  are  sometimes  added.  There  are  a  num- 
ber of  lease  forms  in  general  use.  These  forms  vary  from 
the  very  short  monthly  letting  agreement  to  the  lengthy  agree- 
ment drawn  to  contain  provisions  for  an  important  long-term 
lease.  There  is  no  one  form  that  will  fit  every  case — a  lease 
must  be  drawn  so  that  it  expresses  the  intended  agreement 
between  landlord  and  tenant.  Reference  to  the  forms  in  the 
appendix  will,  however,  illustrate  some  conditions  that  have 
been  found  of  value. 

Repairs. — The  general  rule  is  that  neither  party  to  a  lease 
is  required  to  make  repairs,  but  the  tenant  is  required  to  sur- 
render the  premises  at  the  expiration  of  the  term  in  as  good 
a  condition  as  they  were  in  at  the  commencement  of  the  lease, 
reasonable  wear  and  tear  and  damage  by  the  elements 


LEASES  131 

excepted.  Occasionally  the  lease  provides  that  the  landlord 
shall  make  certain  repairs  only.  There  is  no  legal  require- 
ment that  the  landlord  make  the  ordinary  repairs  for  the 
up-keep  of  the  property  except  that  the  building  must  be  kept 
tenantable.  If  a  building  becomes  untenantable  the  tenant 
may  remove  on  the  ground  that  he  has  been  constructively 
evicted.  Destruction  of  the  building  usually  terminates  the 
lease,  neither  party  being  obliged  to  rebuild,  unless  the  lease 
provides  otherwise. 

Improvements. — All  improvements  become  the  property 
of  the  landlord  when  made.  It  is  proper  in  some  cases  to 
provide  that  some  or  all  improvements  may  be  removed  at 
or  prior  to  the  expiration  of  the  lease.  Fixtures  and  machin- 
ery installed  by  the  tenant  are  usually  considered  personal 
property  and  are  removable  when  the  tenant  removes.  The 
lease  usually  provides  that  no  alterations  to  the  building  shall 
be  made  without  the  consent  of  the  landlord. 

Liens. — The  tenant  may  make  repairs,  alterations  or  im- 
provements to  the  premises  with  the  consent  of  the  landlord. 
The  landlord  should  guard  against  the  contingency  of  the 
tenant  neglecting  to  pay  for  the  work  so  performed,  and  the 
consequent  filing  of  mechanic's  liens  by  those  who  did  the 
work.  The  law  permits  the  mechanics  and  material  men 
under  such  circumstances  to  enforce  their  lien  against  the 
landlord's  property,  although  they  may  not  be  able  to  hold 
the  landlord  personally.  Where  work  of  this  kind  is  con- 
templated, the  lease  should  provide  that  if  such  a  lien  is  filed 
the  landlord  may  pay  it  and  add  it  to  the  next  installment  of 
rent  becoming  due  under  the  lease.  This  may  result  in  a  dis- 
possess of  the  tenant  for  non-payment  of  rent  unless  he  re- 
imburses the  landlord  for  the  amount  he  has  paid  to  free  his 
property  from  the  lien. 

The  landlord  may  demand  further  protection  from  liens  by 
requiring  that  the  tenant  deposit  cash  or  file  a  bond  as  a  guar- 
antee that  the  cost  of  the  repair  or  construction  work  will  be 
paid.  This  is  of  especial  importance  in  leases  which  provide 
that  the  tenant  is  to  make  any  extensive  repairs,  alterations 
or  improvements. 

Security  furnished  by  tenant. — A  landlord  when  making 
an  important  lease  may  properly  require  that  the  tenant  fur- 
nish security  for  the  performance  of  the  terms  of  the  lease. 
This  security  may  be  in  the  form  of  cash  or  negotiable  securi- 


132    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

ties  or  it  may  be  in  the  form  of  a  bond  executed  by  personal 
sureties  or  a  surety  company.  There  is  no  rule  as  to  the 
amount  of  the  security,  but  it  is  usually  in  proportion  to  the 
amount  of  rent  reserved  by  the  lease.  The  security  may  be 
a  sum  equal  to  the  rent  for  one  month  or  several  months,  or 
even  a  year  or  more.  It  is  often  agreed  that  the  tenant  shall 
receive  interest  at  a  certain  rate  on  cash  security  deposited 
by  him. 

Additional  charges  paid  by  tenant. — The  lease  may  pro- 
vide that  not  only  shall  the  tenant  pay  the  landlord  an  agreed 
rental,  but  also  that  he  shall  pay  some  or  all  of  the  expenses 
and  carrying  charges  of  the  property.  In  cases  where  the 
tenant  pays  all  expenses  and  charges,  the  rent  paid  to  the 
landlord  is  said  to  be  a  "net  rental."  That  is,  the  landlord's 
income  from  the  rent  of  the  property  is  net  to  him,  the  tenant 
meeting  all  charges  in  connection  with  the  property.  These 
charges  may  include  taxes,  assessments,  water  rates,  fire  and 
plate  glass  insurance  premiums.  Interest  on  mortgages  is  not 
usually  included  among  the  charges  to  be  paid  by  a  tenant. 

It  should  be  a  part  of  the  agreement  that  the  landlord 
may  pay  any  or  all  of  such  charges  that  the  tenant  fails  to 
pay  and  that  any  charge  so  paid  becomes  additional  rent  pay- 
able with  the  next  installment  of  rent  under  the  lease. 

Fire  clause. — The  long  form  of  lease  given  in  the  appendix 
provides  that  the  tenant  shall  give  the  landlord  immediate 
notice  of  any  fire.  It  is  then  the  landlord's  duty  to  repair 
the  damage  as  speedily  as  possible.  If  the  tenant  remains 
in  possession,  the  rent  continues  regardless  of  the  fire,  but  if 
the  damage  is  such  that  the  tenant  is  compelled  to  remove, 
the  rent  ceases  until  such  time  as  the  property  is  restored 
to  its  former  condition.  In  cases  of  total  destruction  of  the 
property  by  fire,  the  lease  is  terminated;  rent  is  paid  up  to 
the  date  of  the  fire  and  thereafter  the  liability  of  the  parties 
ceases.  It  is  advisable  to  include  a  fire  clause  in  the  lease  so 
that  the  rights  of  the  parties  on  the  happening  of  such  an 
event  are  clearly  defined.  In  some  States  the  law  provides 
that  a  fire  which  renders  the  premises  untenantable  terminates 
the  lease.  If  there  is  no  such  provision  of  law  or  if  the  law 
provides  the  contrary,  the  lease  of  the  premises  continues 
regardless  of  any  damage  by  fire. 

Assignment  and  mortgaging  of  lease  and  sub-lettings.— 
The  tenant's  rights  under  a  lease  being  personal  property 


LEASES  133 

are  assignable,  unless  the  lease  itself  contains  a  covenant 
forbidding  its  assignment.  A  landlord  often  makes  a  lease 
relying  on  the  financial  stability  of  the  tenant,  or  because  the 
tenant  is  personally  acceptable  to  him,  and  it  is  often,  there- 
fore, his  desire  to  prevent  an  assignment  of  the  lease  to  an- 
other person.  A  landlord  may  in  any  event  consent  to  a 
proposed  assignment  if  he  wishes  to  do  so. 

It  has  been  a  rule  that  when  a  lease  has  once  been  assigned, 
with  the  landlord's  express  or  implied  consent  or  ratification, 
that  it  is  thereafter  freely  assignable.  To  prevent  this,  it  is 
well  to  provide  that  the  landlord's  failure  to  insist  upon  a 
strict  performance  of  the  terms  and  conditions  of  the  lease 
shall  not  be  a  waiver  of  his  rights  as  to  any  future  breach  of 
the  conditions.  The  lease  should  also  provide  that  an  assign- 
ment (even  with  landlord's  consent)  shall  not  relieve  the 
original  lessee  of  his  liability  to  pay  rent,  except  that  he  shall 
be  credited  with  any  rent  collected  by  the  landlord  from  the 
assignee. 

The  usual  rule  regarding  assignments  is  that  the  original 
lessee  can  be  held  personally  for  the  rent  called  for  by  the 
lease  even  though  he  has  assigned  it  and  the  assignee  is  in  pos- 
session. Of  course,  the  owner  of  the  property  may  waive 
this  by  express  or  implied  agreement,  but  unless  such  agreement 
can  be  shown  the  liability  continues.  The  assignee  of  the 
lease  in  order  to  retain  possession  would,  of  course,  have  to 
pay  the  rent  and  comply  with  the  other  terms  of  the  lease. 
His  failure  to  pay  the  rent  would  permit  the  landlord  to  dis- 
possess him.  If  the  landlord  wishes  to  sue  for  the  rent  due 
him  his  suit  against  the  assignee  would  be  to  recover  rent 
based  on  use  and  occupation,  unless  the  assignee  had  made 
some  binding  agreement  to  pay  the  rent  called  for  by  the 
lease.  Rent  based  on  use  and  occupation  may  be  the  same 
rent  that  the  lease  calls  for  but  not  necessarily  so. 

A  sub-letting  is  a  letting  of  premises  by  a  tenant  to  an 
under-tenant.  It  may  be  for  all  or  part  of  the  premises  or 
for  the  whole  term  or  part  of  it.  Many  leases  provide  that 
there  shall  be  no  sub-letting  without  the  consent  of  the  lessor. 
This  covenant  is  valuable  if  the  landlord  wishes  to  control 
the  character  of  the  occupancy. 

The  tenant  may  mortgage  the  lease,  that  is  the  leasehold 
(the  tenant's  rights  under  the  lease)  may  be  given  as  security 
for  money  borrowed  by  him,  unless  the  lease  restricts  him 


134   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

from  so  doing.  In  New  York,  a  mortgage  on  a  lease  is  a 
conveyance  and  comes  under  the  provisions  of  the  recording 
act  and  is,  therefore,  recorded  in  the  same  manner  as  a  mort- 
gage on  real  property  and  not  as  a  chattel  mortgage.  In  some 
jurisdictions  it  is  considered  to  be  a  chattel  mortgage.  In  the 
absence  of  a  statute  or  legal  decision  in  any  particular  State 
it  may  be  considered  advisable  to  file  it  both  ways. 

Use  of  the  premises. — Unless  the  lease  contains  a  restric- 
tion, the  tenant  may  use  the  premises  in  any  legal  manner. 
In  his  use  of  the  premises  he  may  not,  however,  interfere 
with  occupants  of  other  parts  of  the  building.  Illegal  use 
would  permit  an  action  for  dispossession  by  the  landlord  and 
a  lease  specifically  made  for  an  illegal  purpose  would  not  be 
enforceable  by  either  party.  The  purpose  for  which  the 
premises  are  to  be  used  is  often  stated  in  the  lease,  as  for  ex- 
ample, "private  dwelling,"  "boarding-house,"  "retail  drug- 
store," etc.  In  this  connection,  where  it  is  desired  to  limit 
the  use  of  the  property  to  some  specified  purpose  it  is  well 
to  have  the  lease  state  that  the  premises  shall  be  used  for  the 
purpose  mentioned,  and  no  other.  It  was  held  that  where 
the  lease  simply  stated  that  the  tenant  was  to  use  the  premises 
for  a  certain  trade  that  when  that  had  been  done  he  could 
use  it  for  other  trades.  The  lease  may  contain  a  covenant 
that  the  premises  may  not  be  used  for  any  purpose  extra 
hazardous,  or  objectionable,  or  detrimental  to  the  neighbor- 
hood, or  a  provision  of  similar  import. 

Compliance  with  orders  of  governmental  authorities.— 
Under  the  police  power  of  the  State,  laws  have  been  enacted 
governing  and  controlling  the  use,  occupancy  and  condition  of 
real  property.  These  laws  are  enforced  through  various  de- 
partments and  bureaus.  It  is  appropriate  to  provide  in  certain 
leases  that  the  tenant  will,  at  his  own  expense,  comply  with 
the  orders  issued  by  these  authorities.  The  importance  of 
such  a  provision  in  a  lease  depends  on  the  use  for  which  the 
premises  are  leased  to  the  tenant  and  the  extent  to  which 
control  passes  to  the  tenant.  As  an  example,  it  may  be  noted 
that  in  the  case  of  a  factory  building  leased  to  one  tenant, 
it  should  usually  be  a  condition  that  elevators,  stairways  and 
fire-escapes  be  kept  in  a  safe  condition  and  that  the  provisions 
of  the  labor  department,  health  department,  fire  department 
and  building  department  be  complied  with  by  the  tenant. 

Guarantors  and  sureties. — The  landlord  may  require  and 


LEASES  135 

the  tenant  give  a  guarantee  by  a  third  party  of  the  faithful 
performance  of  the  terms  of  the  lease  by  the  tenant.  The 
agreement  of  guaranty  must  be  in  writing  and  signed  by  the 
guarantor.  (Appendix  form  70.)  It  may  be  a  separate  in- 
strument but  is  often  endorsed  upon  the  lease.  The  guaranty 
may  also  be  in  the  form  of  a  bond  executed  by  personal  sure- 
ties or  a  surety  company. 

Tenant  liable  after  re-entry. — It  is  frequently  desirable 
to  include  in  a  lease  provisions  to  the  effect  that  if  a  tenant 
is  dispossessed  by  summary  proceedings,  or  if  the  tenant 
abandons  the  property  and  the  landlord  re-enters  and  takes 
possession,  the  landlord  has  the  option  of  holding  the  tenant 
liable  for  the  rent  until  the  end  of  the  term  of  the  lease.  The 
landlord  may  re-let  the  premises  as  the  agent  of  the  tenant, 
and  in  such  event  he  credits  the  tenant  with  the  amount  he 
collects  from  the  person  to  whom  the  property  is  re-let.  A 
clause  of  this  kind  prevents  absolute  termination  of  the  lease 
by  a  summary  proceeding  or  the  landlord's  re-entry. 

Right  of  redemption. — In  some  states  there  is  a  provision 
of  law  that  where  a  tenant  is  dispossessed  and  the  lease  that 
he  held  had  a  period  of  more  than  five  years  unexpired,  that 
he  has  a  right  to  come  in  at  any  time  after  the  dispossess  and 
pay  up  all  arrears,  and  again  obtain  possession  of  the  property. 
That  is  to  say,  he  has  a  right  of  redemption.  In  the  long 
form  of  lease  given  in  the  appendix  the  tenant  specifically 
waives  this  right  of  redemption.  The  advantage  of  such  a 
clause  is  that  it  enables  the  landlord  to  be  rid  of  a  tenant 
who  does  not  promptly  meet  his  obligations  and  he  may  then 
proceed  to  obtain  another  tenant  without  fear  of  the  first 
tenant  coming  in  and  claiming  the  right  of  redemption. 

Tenant  to  indemnify  landlord  for  damages. — It  is  proper 
to  provide  in  a  lease  that  the  tenant  shall  hold  the  landlord 
harmless  from  all  claims  for  damages  to  both  person  and 
property  of  every  kind  and  nature.  This  clause  tends  to 
relieve  the  landlord  of  claims  that  may  be  made  because  of 
accidents  to  persons  having  access  to  the  property  or  passing 
on  the  street  adjacent  thereto. 

The  responsibility  for  injuries  received  upon  the  premises 
often  falls  either  upon  the  landlord  or  the  tenant.  The  gen- 
eral rule  is  that  he  who  has  the  custody  and  control  of  that 
part  of  the  premises  where  the  accident  occurs  is  liable  to 
damages  for  the  injuries  resulting.  Consequently  the  tenant  of 


136    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

an  entire  building,  having  control  and  possession  of  the  entire 
building,  is  responsible  for  any  injury  caused  by  a  negligent 
condition  of  the  building.  As  to  apartment  houses  or  other 
buildings  in  which  there  are  several  tenants,  it  is  usually  the 
case  that  each  tenant  has  custody  and  control  of  his  own  apart- 
ment or  space  in  the  building,  while  the  landlord  retains  the 
custody  and  control  of  those  parts  of  the  building  which  are 
used  in  common  by  the  tenants,  namely,  the  roof,  halls,  stair- 
ways and  entrance.  In  such  a  building,  therefore,  the  tenants 
would  be  responsible  only  for  injuries  arising  from  negligence 
in  their  apartments,  while  the  landlord  would  be  liable  for 
injuries  sustained  upon  roof,  halls,  stairways  or  entry.  It 
must  be  borne  in  mind,  of  course,  that  neither  the  landlord  nor 
tenant  is  liable  for  an  injury  caused  by  a  negligent  condition 
existing  in  the  building  unless  he  either  actually  knew  or 
should  have  known  of  the  condition.  Also,  neither  the  land- 
lord nor  the  tenant  is  responsible  for  an  accident  unless  it 
was  caused  by  negligence  on  the  part  of  either  of  them.  In 
most  States,  an  exception  to  the  above  rules  exists  under  which 
the  landlord  may  be  responsible  for  some  accidents  in  a  build- 
ing even  if  a  tenant  has  possession  and  control  of  the  entire 
building.  Such  would  be  an  injury  arising  from  a  negligent 
condition  which  existed  at  the  time  the  landlord  leased  the 
property  to  the  tenant.  For  example,  a  tenant  is  in  posses- 
sion and  control  of  a  one-family  dwelling  house.  The  stair 
carpet  installed  by  the  tenant  becomes  worn  and  causes  a 
visitor  to  trip,  fall  and  injure  himself.  In  that  case  the  tenant 
would  be  responsible  for  the  damages  sustained.  Suppose, 
however,  that  the  staircase  was  so  erected  as  to  be  very  steep 
and  the  treads  very  narrow  so  that  it  would  be  dangerous 
to  anyone  going  up  or  down  the  stairs.  In  that  event  a  person 
falling  upon  the  stairs  would  have  a  claim  against  the  land- 
lord rather  than  the  tenant.  In  other  words,  if  there  is  some 
inherent  defect  in  the  property  at  the  time  of  the  creation  of 
the  lease,  the  landlord  would  be  liable  for  any  injury  caused 
by  that  inherent  defect.  It  is  also  true  that  if  the  landlord 
rented  the  property  for  a  dangerous  or  illegal  purpose  he 
would  be  liable  for  damages. 

In  certain  cases  both  the  landlord  and  the  tenant  would 
be  liable  for  damages,  as  when  the  landlord  created  a  nuisance 
and  the  tenant  continued  it.  In  one  recorded  case,  the  land- 
lord of  a  building  installed  a  sink  without  an  overflow  pipe. 


LEASES  137 

The  tenant  allowed  the  water  to  overflow  from  the  sink  with 
the  result  that  the  property  of  a  tenant  in  a  lower  apartment 
was  damaged.  The  injured  party  was  allowed  to  hold  both 
the  landlord  and  the  tenant  for  the  damages. 

Leases  subordinate  to  mortgages. — A  lease  of  property  is 
subject  to  mortgages  and  other  liens  upon  the  property  of 
record  when  the  lease  is  made;  that  is,  such  liens  would  be 
superior  to  the  rights  of  the  tenant.  When  the  lease  is  made 
the  tenant  usually  takes  possession  of  the  property.  He  may 
also  record  his  lease.  Either  would  give  notice  to  persons 
thereafter  dealing  with  the  property  of  the  rights  of  the  ten- 
ant and  a  mortgage  made  after  the  lease  would  therefore  be 
subordinate  to  the  lease.  It  would  seem  to  be  important,  there- 
fore, that  tenants  who  propose  to  erect  a  building  or  spend 
money  in  considerable  amounts  on  the  property,  should  inquire 
into  existing  mortgages.  It  is  also  important  for  mortgagees 
to  find  out  about  existing  leases.  Leases  may  be  an  advantage 
to  the  property,  rather  than  a  disadvantage,  the  amount  of 
rent  and  length  of  time  called  for  by  the  lease  being  the 
determining  factors.  A  case  is  on  record  where  a  bank  loaned 
$82,000  on  a  piece  of  property,  ignoring  the  rights  of  the 
people  in  possession.  The  mortgage  was  afterwards  fore- 
closed and  it  was  then  found  that  the  property  was  occupied 
by  tenants  having  a  ten-year  lease  with  an  option  of  a  further 
renewal  of  ten  years  at  an  annual  rental  of  $6,000.  It  is 
evident  that  a  rent  of  $6,000  was  entirely  inadequate  for  a 
piece  of  property  costing  a  mortgagee  in  excess  of  $82,000 
and  the  lease  was  especially  disadvantageous  in  that  it  had  a 
long  time  to  run  at  the  low  rental. 

Leases  often  provide  that  they  shall  be  subordinate  to 
mortgages  up  to  a  certain  amount  and  this  provision  may 
permit  the  landlord  to  increase  existing  mortgages  up  to  the 
agreed  amount.  The  provision  of  the  lease  should  be  that  the 
tenant  will  execute  necessary  agreements  to  effect  such  sub- 
ordination. 

Covenants  by  landlord. — The  covenant  in  the  lease  speci- 
fically made  by  a  landlord  is  that  of  quiet  enjoyment.  There 
are  implied  covenants  of  possession  and  sometimes  fitness  for 
use.  There  is  usually  no  warranty,  as  to  the  lease  of  a  whole 
house,  of  habitability  nor  suitability.  However  if  a  landlord 
leases  an  apartment  in  a  house,  or  an  office  in  an  office  building, 
there  is  an  implied  covenant  that  the  portions  of  the  building 


138    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

used  by  all  of  the  tenants  are  fit  for  the  use  for  which  they  are 
intended.  The  implied  covenant  of  possession  is  that  the  ten- 
ant can  hold  possession  against  everyone  including  the  landlord. 
Of  course,  the  landlord  is  usually  allowed  under  the  terms  of 
the  lease  the  right  to  show  the  property  to  another  tenant  or  a 
purchaser  for  a  short  period  before  the  expiration  of  the  lease, 
and  the  lease  also  usually  gives  him  the  right  to  enter  and 
make  necessary  repairs  or  comply  with  the  requirements  of 
governmental  authorities.  The  important  point  for  the  tenant 
is  that  it  is  incumbent  upon  the  landlord  to  accord  him  posses- 
sion for  the  term  of  the  lease  subject  only  to  its  conditions. 


CHAPTER  XII 

BROKERAGE 

Definition  of  a  broker. — Real  estate  brokers  are  those  who 
negotiate  between  the  buyer  and  seller  of  real  property,  either 
finding  a  purchaser  for  one  desirous  to  sell,  or  vice  versa; 
they  also  manage  estates,  lease  or  let  property,  collect  rents, 
and  negotiate  loans  on  bonds  and  mortgages.1  A  real  estate 
broker  has  also  been  defined  as  one  who  makes  a  bargain 
for  another  and  receives  a  commission  for  so  doing.2  The 
real  estate  broker  is  usually  considered  as  an  agent  acting 
for  one  of  the  parties  to  a  transaction,  although  in  some 
cases  he  may  have  merely  the  character  of  a  middleman  in 
bringing  the  parties  together.  The  person  represented  by 
the  broker  is  the  principal,  he  may  be  known  as  owner  or 
purchaser,  vendor  or  vendee,  buyer  or  seller,  lender  or  bor- 
rower, lessor  or  lessee. 

Compensation  of  brokers. — The  compensation  paid  a  real 
estate  agent  or  broker  is  called  commission  or  brokerage. 
He  is  not  paid  a  salary,  for  if  he  receives  a  salary  from  his 
employer  he  is  a  salesman,  not  a  broker.  The  amount  of 
commission  or  brokerage  is  commensurate  with  the  size  of 
the  transaction,  that  is,  the  amount  of  money  involved.  There 
is  usually  a  rate  of  commission  agreed  upon  or  fixed  by  the 
custom  of  the  business.  Each  transaction  is  paid  for  sepa- 
rately, so  that  the  earnings  of  the  broker  are  dependent  upon 
his  success  in  bringing  about  transactions. 

Qualifications  of  a  broker. — A  broker  to  be  successful  must 
possess  the  qualifications  of  a  salesman.  His  salesmanship 
should  be  of  the  highest  type,  as  he  is  dealing  with  a  valuable 
commodity  and  there  arc  often  long  and  difficult  negotiations. 
He  is  a  salesman  not  only  in  bringing  about  sales  and  ex- 
changes of  real  estate,  but  also  in  effecting  leases  and  securing 
mortgage  loans.  The  loan  broker,  for  example,  seeks  to 
present  a  loan  to  a  lender  in  such  a  manner  as  to  make  it 
attractive.  He  should  be  familiar  with  the  property  which 

*4  Am.  &  Eng.  Ency.  of  Law  (2nd  Ed.)  962. 
1  Potts  vs.  Turner,  6  Bing.  702,  706. 

139 


140    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

is  the  subject  of  the  application,  know  all  of  the  features 
which  make  it  valuable  and  which  add  to  its  desirability  as 
security  for  a  loan  and  be  able  to  convince  the  lender  regarding 
them. 

The  rights  and  duties  of  a  broker  in  relation  to  his  prin- 
cipal and  others  have  been  defined  in  numerous  legal  decisions. 
In  this  chapter,  the  broker  is  considered  with  reference  to 
these  rights  and  duties.  His  business  is  also  briefly  described. 

The  broker's  business. — The  ordinary  real  estate  broker 
does  a  general  business.  His  office  is  open  to  every  trans- 
action pertaining  to  real  estate.  He  brings  about  purchases 
and  sales,  exchanges,  rentals,  mortgage  loans;  he  also  collects 
rents  and  places  fire  insurance.  Some  brokers  make  a  specialty 
of  certain  branches  of  the  business.  They  may  work  on  real 
estate  sales  alone,  or  on  placing  loans,  or  on  leases,  sometimes 
leases  of  a  particular  class  of  property.  Whether  he  does 
a  general  business,  or  specializes  in  a  particular  line,  the  legal 
rules  applicable  are  the  same  and  the  essentials  for  success  no 
different. 

The  broker  should  possess  accurate  information  regarding 
the  property  he  attempts  to  sell,  rent,  or  mortgage.  Some 
of  the  property  is  listed  with  him  voluntarily,  and  some  he 
goes  out  and  obtains.  In  either  case  he  should  keep  a  record 
in  which  full  details  of  the  property  are  stated.  The  informa- 
tion should  include 

a.  Definite  location.     This  may  be  by  street  number, 
but  the  dimensions  of  the  plot  should  also  be  stated.     This  is 
true  also  of  property  designated  by  lot  numbers ;  the  prospec- 
tive purchaser  may  want  to  know  the  size  of  the  property. 
If  possible  a  diagram  of  the  plot  should  be  obtained. 

b.  Description  of  improvements.        Size  of  the  house, 
number  of  stories  in  height,  number  of  rooms  and  baths, 
construction  material,  kind  of  heat  and  light,  floors,  trim  and 
decorations,   age  of  building  and  whether  in  good  or  poor 
repair,  if  for  one  or  more  families,  and  if  apartment  house 
the  number  of  apartments  and  rooms  in  each. 

c.  Price  and  terms  of  sale.     The  amount  of  existing  mort- 
gages and  the  terms  of  them.     The  amount  of  cash  required 
and  whether  owner  will  take  part  of  price  in  a  purchase  money 
mortgage  and  if  so  its  terms.     The  particulars  of  any  tenancy, 
the  length  of  the  term  and  the  rent. 

The  foregoing,  and  any  additional  information,  may  for  the 


BROKERAGE  141 

sake  of  convenience  and  accessibility  be  recorded  on  a  sheet 
or  card  ruled  and  printed  for  the  purpose.3 

Of  course  a  broker  should  know  whether  the  price  asked 
by  the  owner  is  reasonable  or  not.  His  knowledge  of  other 
sales  will  help  him  to  determine  this.  In  renting  property, 
he  should  be  familiar  with  the  rents  being  asked  by  other 
owners  and  brokers  for  similar  space. 

He  should  at  all  times  be  familiar  with  changing  conditions, 
increasing  or  decreasing  values,  existing  and  proposed  transit 
and  all  other  things  which  affect  or  tend  to  affect  values  and 
rentals. 

The  broker,  it  may  be  repeated,  is  a  salesman.  Thorough 
familiarity  with  his  stock  of  goods  is  a  necessity.  He  will  see 
to  it  that  his  office  records  are  kept  in  such  a  manner  as  to  be 
of  the  most  value  to  him.  The  prospective  purchaser  with 
whom  he  deals  may  be  a  home-seeker,  or  an  investor,  or  a 
builder.  He  must  get  him  what  he  wants — he  should  present 
to  him  everything  available.  If  he  doesn't  interest  the  pur- 
chaser some  one  else  will.  This  may  require  the  broker  with 
a  prospective  buyer  to  seek  the  suitable  property.  He  may 
have  to  look  for  a  long  time  before  finding  the  right  parcel. 
When  he  locates  it,  he  must  obtain  the  price  and  terms  and 
get  the  owner's  agreement  to  pay  him  a  commission  for 
selling  it. 

The  mortgage  loan  broker. — The  mortgage  loan  broker 
must  first  of  all  obtain  the  application  for  a  loan  and  then  find 
a  lender  with  whom  to  place  it.  This  application  should  defi- 
nitely state  the  amount  of  loan  desired,  the  rate  of  interest 
the  borrower  is  willing  to  pay,  the  number  of  years  the  mort- 
gage is  to  run,  the  installments,  if  any,  to  be  paid  on  the 
principal  during  the  term,  a  diagram  or  description  of  the 
property  offered  as  security  for  the  loan,  the  particulars  of 
the  improvements  on  the  property,  the  rents  being  received 
and  the  terms  of  the  leases.  It  is  well  also  to  know  the  name 
of  the  bondsman  as  lenders  frequently  consider  the  bond  of- 
fered in  connection  with  a  loan.  The  owner  usually  states 
the  value  he  places  upon  the  property.  There  should  also 
be  an  agreement  to  pay  the  broker's  commission  if  he  succeeds 
in  placing  the  loan,  and  if  the  authorization  is  exclusive  for 
a  specified  period  the  broker  will  be  better  protected.4 

*  See  Appendix,  form  78. 

4  For  a  loan  broker's  blank  see  appendix,  form  77. 


142    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

Management. — Some  brokers  do  a  large  business  in  the 
management  of  property  for  others.  They  collect  the  rent, 
order  the  repairs,  hire  and  pay  the  employees  and  generally 
take  the  owner's  place  in  running  the  building.  They  receive 
a  percentage  of  the  rents  collected  as  compensation  for  their 
services. 

Essentials  of  success. — The  broker's  own  stock  in  trade  is 
his  brains,  ability,  resourcefulness,  salesmanship,  and  the  good- 
will he  builds  up  through  having  satisfied  customers.  The 
qualities  for  success  are  the  same  in  the  real  estate  business 
as  in  any  other  business.  Faithful  honest  dealing  is  a  re- 
quisite. As  the  circle  of  a  broker's  clients  is  increased,  his 
business,  and  therefor  his  income  grows. 

Much  time  and  effort  may  be  put  on  a  proposition  by  a 
broker  only  to  have  it  produce  no  fruit.  The  deal  may  be 
almost  made  and  then  fall  through.  Disappointments  are 
part  of  the  "game"  however,  and  brokers  quickly  forget  them 
and  take  up  another  matter  with  hopes  of  more  success.  It 
is  the  part  of  wisdom  for  a  broker  to  be  reasonably  sure  that 
he  is  dealing  with  the  principals  or  with  their  authorized  rep- 
resentatives— also  that  there  is  nothing  which  will  prevent 
the  consummation  of  the  transaction,  such  as  restrictions  on  the 
property  or  incapacity  of  the  owner.  A  knowledge  of  these 
things  may  save  the  broker  useless  effort  and  prevent  a  waste 
of  valuable  time. 

The  broker's  authority. — In  New  York  and  other  states, 
the  broker's  authority  to  negotiate  a  sale,  exchange,  or  lease 
of  real  property  need  not  be  in  writing.  In  New  Jersey  and 
some  states  however,  the  statute  provides  that  unless  the 
broker  has  written  authority  he  cannot  recover  any  commission 
for  making  a  sale  or  exchange.  There  are  some  localities  in 
which  the  broker  must  procure  a  license  or  pay  a  tax. 

The  ordinary  authority  of  the  broker  is  to  conduct  the 
negotiations  only.  Unless  he  is  a  mere  middleman,  he  has 
a  certain  amount  of  discretion  and  actually  represents  his 
employer.  His  authority  does  not  usually  include  the  right 
to  execute  a  contract  of  sale  or  purchase  on  behalf  of  his  em- 
ployer, but  he  may  be  given  such  right.  Authority  to  execute 
a  real  estate  contract  can  be  given  .by  parol  in  New  York 
and  in  some  other  states.  In  Illinois,  California  and 
others,  written  authority  to  sign  contracts  is  required.  Al- 
though a  broker  may  have  signed  a  contract  without  any 


BROKERAGE  143 

authority  to  do  so,  the  principal  may,  if  he  wishes,  accept 
it  and  ratify  the  agent's  act.  A  broker's  authority  to  sign 
contracts  may  be  inferred  from  circumstances  or  a  course  of 
dealing  or  the  contract  may  be  ratified  by  the  conduct  of  the 
principal. 

May  not  act  for  both  parties. — The  broker  is  usually  the 
agent  or  representative  of  his  principal.  As  such  he  owes  it 
to  his  principal  to  give  faithful,  honest  service.  He  should 
not  allow  personal  considerations  to  interfere  with  his  duty. 
uNo  man  can  serve  two  masters"  is  an  age-old  truth  and  applies 
to  the  real  estate  broker's  relations  with  the  principals  to  a 
transaction.  A  number  of  legal  decisions  hold  that  a  broker, 
clothed  with  the  slightest  discretion,  cannot  secretly  accept 
compensation  from  both  parties.5  The  interests  of  purchaser 
and  seller  are  adverse,  and  it  is  inconsistent  with  the  proper 
performance  of  his  duty  to  one  employer  that  he  act  for  and 
accept  reward  from  another.  It  is  a  breach  of  his  implied 
contract  with  each.  His  acting  for  both  without  disclosing 
the  fact  constitutes  a  fraud  and  precludes  the  recovery  of  com- 
mission.6 It  was  held  in  one  case  that  it  was  the  character 
of  the  employment  that  determined  the  matter,  and  that  where 
the  broker  was  employed  merely  to  bring  the  parties  together, 
the  terms  being  arranged  between  the  parties  when  they  met, 
it  was  not  improper  for  him  to  accept  a  commission  from  both 
even  though  he  failed  to  notify  them  of  it.7.  Of  course  in 
any  case,  the  broker  can  accept  a  double  commission  with  the 
knowledge  and  consent  of  the  parties. 

Sharing  in  profits. — To  act  in  the  interests  of  his  em- 
ployer is  clearly  the  duty  of  an  agent.  This  means  that  on 
a  real  estate  transaction,  the  broker  should  get  the  best  price 
and  terms  for  his  principal.  It  is  highly  improper  for  him 
to  be  at  the  same  time  a  broker  and  a  purchaser.  He  can  of 
course  purchase  the  property  if  he  acts  openly  in  so  doing  and, 
if  the  owner  understands  it  and  agrees  to  it,  he  may  even 
receive  a  commission.  The  usual  rule  however  is  that  an 
agent  cannot  buy  from  nor  sell  to  his  principal  while  he  acts 
as  agent.8  A  broker  may  be  authorized  to  sell  at  a  net  price 

"See  Harten  vs.  Loffler,  31  App.  D.  C.  368;  Roome  vs.  Robinson,  99  App.  Div. 
143  (N.  Y.) 

"Plotner  vs.  Chillson,  95  Pac.  777;  Duryee  vs.  Lester,  73  N.  Y.  442;  Carman 
vs.  Beach,  63  N.  Y.  97. 

'  Knauss  vs.  Krueger  Brewg.  Co.,  142  N.  Y.  75. 


144   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

with  the  understanding  that  he  shall  receive  as  compensation 
all  he  may  obtain  above  that  figure.  If  he  is  merely  employed 
to  sell,  however,  and  the  owner  names  a  price,  he  is  in  duty 
bound  to  do  better  if  he  is  able,  and  he  cannot  pretend  to  sell 
at  such  price  when  in  reality  he  is  getting  more,  and  having 
a  secret  interest  in  the  profit  thus  obtained.  In  a  New  York 
case  a  broker  contracted  to  sell  at  a  price  of  $17,000.  He 
advised  his  principal  of  this,  but  later  receiving  an  offer  of 
$26,000  for  the  same  property,  he  took  an  assignment  of  the 
first  contract  and  then  became  the  vendor  under  a  second 
contract  at  the  advanced  price.  He  then  had  the  seller  deed 
directly  to  the  second  purchaser,  received  the  $26,000,  but 
accounted  to  the  seller  for  only  $17,000.  The  court  held 
that  the  broker  could  not  appropriate  the  difference  between 
these  amounts,  but  that  his  principal  was  entitled  to  the  bene- 
fits of  the  second  sale.9 

The  same  rule  applies  to  employees  of  the  broker  and  also 
officers  of  a  corporation.  A  trustee  cannot  be  interested  in 
the  subject  of  the  trust.  The  interest  of  the  principal  "must 
be  his  interest,  and  he  can  have  no  interest  which,  conflicting 
with  those  of  his  principal,  can  work  injury  to  the  latter."10 

Broker  must  be  employed. — In  order  that  a  broker  may  be 
able  to  recover  commission  for  his  services,  it  is  necessary  that 
there  be  acontract  of  employment  with  the  one  for  whom  he 
acts.  As  already  noted,  this  need  not  be  a  written  agreement 
except  in  those  statesjwhere  the  law  requires  it.  But,  never- 
theless, there  must  be  employment,  either  express  or  implied, 
or  the  broker  has  no  legal  ground  for  his  claim.  Volunteers 
are  not  entitled  to  compensation,  and  a  broker  who  performs  a 
service  without  having  it  understood  that  he  is  to  be  paid  for 
doing  so,  may  find  himself  classed  as  a  volunteer.11 

A  person  who  has  merely  inquired  the  owner's  price  for  a 
piece  of  property,  and  procured  a  buyer  at  that  price  is  not 
entitled  to  a  commission.  If  he  could,  an  owner  could  scarce- 
ly quote  a  price  to  anyone  without  laying  himself  open  to  a 
claim  from  someone  for  commission  when  he  sold  his  property. 

"Gardner  vs.  Ogden,  22  N.  Y.  327;  see  also  Clark  vs.  Bird,  66  App.  Div.  284 
(N.  Y.),  which  quotes  from  Story  on  Agency. 
•Bain  vs.  Brown,  56  N.  Y.  285. 
"McDonald  vs.  Lord,  26,. How.  Pr.  407. 
"Benedict  vs.  Pell,  70  App.  Div.  43   (N.  Y.). 


BROKERAGE  145 

The  courts  have  clearly  settled  this  point  and  have  stated  that 
"an  owner  cannot  be  enticed  into  a  liability  for  commissions 
against  his  will."12 

It  is  of  course  more  satisfactory  if  there  is  a  written 
authorization  stipulating  the  amount  of  the  commission,  for 
then  the  employment  is  easily  proved.  It  is  also  a  clear  case 
of  employment  when  the  owner  comes  to  the  broker  and  lists 
his  property  with  him.  The  owner,  it  is  assumed,  must  know 
the  broker  expects  to  be  paid  a  commission  if  he  secures  a 
customer.  The  amount  of  commission,  in  the  absence  of  a 
definite  agreement,  would  be  such  as  is  fixed  by  custom  in  the 
locality. 

A  contract  of  employment  may  be  implied  by  the  past  deal- 
ings of  the  parties,  or  when  it  can  be  shown  that  the  owner 
knew  that  he  was  dealing  through  a  broker  who  expected  to 
be  paid  for  his  services.  Employment  may  be  by  ratification, 
as  when  an  owner  accepts  the  results  of  a  broker's  services 
with  the  plain  intent  to  ratify. 

When  commission  is  earned. — A  broker  has  earned  his 
commission  when  he  has  accomplished  that  for  which  he  was 
employed.  If  he  was  employed  to  sell,  he  must  bring  about 
a  sale.  He  is  not  paid  for  making  impressions,  nor  for  in- 
teresting people  in  the  property  nor  for  an  unsuccessful  effort.13 
The  rule  which  is  supported  by  many  judicial  decisions  is  that 
the  broker  is  entitled  to  commission  when  he  produces  a  pur- 
chaser, ready,  willing  and  able  to  purchase  on  the  terms  offered 
by  the  seller  or  terms  which  he  is  willing  to  accept.  If  a  con- 
tract of  sale  has  been  signed  the  broker  has  the  best  evidence 
of  the  success  of  his  work,  and  a  purchaser  truly  answering 
the  description  of  ready,  frilling  and  able  would  without 
question  sign  such  a  contract.14  The  principal  may  capri- 
ciously change  his  mind  and  refuse  to  make  a  contract  of  sale 
with  the  broker's  customer.  He  of  course  does  not  have  to 
sell,  but  he  is  liable  to  the  broker  for  commission.  The  broker 
has  performed  the  service  for  which  he  was  employed  even 
though  no  actual  sale  resulted.  He  should,  however,  be  pre- 
pared to  prove  that  his  customer  answered  the  required 
description. 

The  broker  may  make  a  special  arrangement  with  his  prin- 

"4  E.  D.  Smith  354. 

"Sibbold  vs.  Bethlehem  Iron  Co.,  83  N.  Y.  383. 

"Wilson  vs.  Mason,  158  111.  310. 


146    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

cipal  whereby  he  limits  himself  to  recovery  of  commission 
only  in  the  event  of  a  sale  being  actually  consummated  by 
delivery  of  the  deed  and  payment  of  the  purchase  price.  Such 
arrangement  to  be  binding  upon  the  broker,  must  be  made 
prior  to  the  time  he  has  earned  his  commission.  If  made 
after  rendering  the  service  for  which  he  was  employed  it 
would  probably  not  be  enforceable  by  reason  of  lack  of  con- 
sideration. Any  special  agreement  of  this  kind  should  con- 
tain a  distinct  provision  that  commission  on  the  sale  shall  be 
due  and  payable  only  if  and  when  the  title  passes  to  the  pur- 
chaser. It  should  be  remembered  that  the  ordinary  obligation 
of  the  broker  is  to  bring  the  principals  to  an  agreement  so 
that  there  is  "a  meeting  of  the  minds"  as  to  the  terms. 

Broker  procuring  cause  of  sale. — It  is  an  established  rule 
that  if  an  authorized  broker  is  the  "procuring  cause"  of  a 
sale,  he  is  entitled  to  his  commission.  He  does  not  have  to 
introduce  the  parties,  nor  bring  them  together  personally. 
If  through  his  efforts  they  get  together  and  come  to  an  agree- 
ment, he  must  be  recognized.  An  illustration  of  this  would 
be  a  case  in  which  the  purchaser  came  to  the  broker's  office, 
was  furnished  by  him  with  the  information  and  sent  to  the 
property.  If  the  purchaser  then  went  to  the  owner  direct  and 
a  deal  was  made  between  them  even  though  the  broker's 
name  was  not  mentioned  he  would  have  an  enforceable  claim 
for  commission.15  If  a  broker  advertises  property,  receives 
and  transmits  an  offer,  but  the  sale  is  finally  consummated 
directly  between  owner  and  purchaser,  he  is  entitled  to  com- 


mission. * 


General  rules  as  to  earning  commission. — In  order  to  re- 
cover commissions,  the  broker  must:  (1)  show  that  he  was 
employed;  (2)  be  the  procuring  cause  of  the  sale;  (3)  bring 
about  the  deal  on  the  terms  of  his  employer;  (4)  act  in  good 
faith;  (5)  produce  an  available  purchaser,  which  under  the 
general  rule  is  ready  and  willing  to  purchase  and  also  legally 
able  to  do  so;  (6)  bring  about  a  completed  transaction.17  We 
have  already  seen  that  double  employment  or  secret  sharing 
in  profits  violates  the  requirements  that  the  broker  act  in  good 
faith.  The  purchaser  brought  by  the  broker  must  meet  all 

"Colonial  Trust  Co.  vs.  Pacific  Co.,  158  Fed.  280;  Kalfstein  vs.  Jackson,  132 
App.  Div.  1  N.  Y. 

"Doran  vs.  Bussard  18  App.  Div.  387  (N.  Y.). 
1T  Gross  on  Real  Estate  Brokers,  page  103. 


BROKERAGE  147 

of  the  terms  as  stated  by  the  seller,  unless  the  seller  is  willing 
to  modify  them.  The  broker  must  complete  his  work.  He 
cannot  abandon  the  negotiations  and  expect  that,  if  the  parties, 
later  and  in  good  faith,  get  together  and  make  a  deal,  he  will 
be  able  to  recover  commission.  The  employer  must  give  the 
broker  a  fair  chance  to  complete  the  transaction  once  he  com- 
mences it,  but  having  done  so  he  may  refuse  to  further  nego- 
tiate through  him  and  may  take  up  the  matter  direct  or  through 
another  broker.  Mere  introduction  of  the  parties  by  the 
broker,  or  commencement  of  negotiations  do  not  limit  the 
owner  to  dealing  with  the  purchaser  through  this  broker 
forever. 

Deferring  or  waiving  commissions. — A  broker  is  entitled 
to  his  commission  as  soon  as  his  work  is  done.  He  does  not 
have  to  wait  until  title  closes  and  any  agreement  he  may  make 
to  do  so,  after  his  commission  has  been  earned,  would  not  be 
binding  upon  him,  but  would  fail  for  lack  of  consideration.  The 
same  would  be  true  of  an  agreement  made  under  similar  cir- 
cumstances to  take  less  than  the  regular  commission,  or  to  split 
the  commission  with  some  one.  In  some  cases  in  order  to 
make  a  deal,  an  owner  may  modify  his  terms  on  condition  that 
the  commission  be  deferred  or  reduced.  If  this  can  be  shown 
to  be  a  consideration  for  the  promise,  the  broker  would  be 
bound  by  it. 

The  refusal  of  the  seller  to  complete  the  transaction,  or  his 
inability  to  do  so,  does  not  affect  the  broker's  claim  for  com- 
mission. Nor  does  the  failure  to  complete  on  the  part  of 
the  purchaser  affect  it.  Owners  in  making  a  contract  of  sale 
or  exchange  should  see  that  they  obtain  a  sufficient  deposit  as 
their  liability  for  commission  to  the  broker  is  fixed. 

Who  pays  the  commission. — It  is  the  employer  who  is  liable 
for  the  commission  in  every  case.  The  employer  of  the 
broker  is  usually  the  owner  of  the  property  or  the  owner's 
representative.  In  some  cases  the  purchaser  employs  the 
broker  to  obtain  the  property  for  him.  The  rule  as  to  double 
employment  has  been  noted.  It  is  no  violation  of  this  rule 
for  a  purchaser  to  employ  a  broker  to  procure  the  property, 
with  the  understanding  that  whatever  commission  he  receives 
shall  be  paid  by  the  seller.  It  is  understood  that  the  site  for 
the  Pennsylvania  Station  in  New  York  City  was  assembled  by 
the  brokers  under  an  arrangement  of  this  kind.  Persons  not 
owning  the  property,  or  those  acting  in  a  representative  capac- 


148    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

ity  are  personally  liable  for  commission  if  they  employ  the 
broker  to  sell  the  property.  It  sometimes  happens  that  a 
purchaser  will,  in  the  contract,  assume  the  seller's  obligation 
to  pay  the  broker's  commission.  This  agreement  is  good  be- 
tween vendor  and  vendee,  but  it  has  no  affect  upon  the  right 
of  the  broker  to  recover  from  his  employer.  A  broker  may 
usually  employ  sub-agents,  but  they  must  look  to  him  for  com- 
missions. 

Commissions  on  exchanges,  loans  and  rentals. — The  rules 
which  apply  to  recovery  of  commission  on  sales  apply  also  to 
exchanges.  It  is  customary,  however,  for  both  parties  to  an 
exchange  to  pay  a  commission  based  on  the  value  or  price 
of  their  respective  properties.  A  statement  in  the  contract 
that  each  party  shall  pay  the  broker  is  sufficient  notice  to  each 
that  he  is  receiving  commission  from  the  other.  He  has  no 
right  to  secretly  make  a  double  commission.  It  often  happens 
that  two  or  more  brokers  are  interested  in  an  exchange  repre- 
senting opposite  sides,  and  they  sometimes  pool  their  com- 
missions and  take  an  equal  division  of  them. 

The  broker  is  usually  entitled  to  commission  for  procuring 
a  mortgage  loan  only  in  the  event  of  the  loan  being  actually 
made,  or  in  case  he  had  procured  an  acceptance  of  it  and  it 
failed  to  close  through  defect  in  the  title  to  the  property  or 
fault  of  the  borrower.  This  is  the  New  York  rule.18  The 
reason  for  this  rule  is  that  there  is  rarely  an  enforceable  agree- 
ment on  the  part  of  a  lender  to  make  a  loan.  The  lender 
may  agree  to  accept  it,  but  this  does  not  constitute  a  contract. 
In  other  jurisdictions  the  rule  seems  to  be  that  the  broker  has 
earned  his  commission  when  he  produces  a  lender,  willing, 
ready  and  able  to  make  the  loan  on  the  terms  offered.19 

The  New  York  rule  with  regard  to  commissions  for  making 
leases  is  similar  to  that  of  procuring  loans.  The  broker  is 
not  entitled  to  compensation  unless  a  lease  or  a  binding  agree- 
ment for  a  lease  is  obtained.  The  broker  would,  however,  be 
entitled  to  his  commission  in  case  the  owner  tried  to  impose 
new  and  unreasonable  terms  upon  a  prospective  tenant  and  the 
lease  was  not  made  for  that  reason.20  In  a  Maine  case  it  was 

"Duckworth  vs.  Rogers,  109  App.  Div.  168  (N.  Y.)  ;  Holliday  vs.  Roxbury 
Dist.  Co.,  130  App.  Div.  654  (N.  Y.). 

"Peet  vs.  Sherwood,  43  Minn.  448. 

"Crombie  vs.  Waldo,  137  N.  Y.  129;  Tenenbaum  vs.  Boehm,  126  App.  Div. 
731  (N.  Y.). 


BROKERAGE  149 

held  that  the  broker's  duty  was  no  more  than  to  bring  the 
owner  one  willing  to  become  a  tenant  on  the  owner's  terms.21 
When  a  lease  has  been  made  the  broker  is  entitled  to  his  full 
commission  and  this  is  so  regardless  of  the  tenant's  subse- 
quent default,  unless  of  course  the  broker  has  made  a  binding 
agreement  to  the  contrary. 

Duty  of  principal  to  broker. — The  principal  having  em- 
ployed the  broker  should  give  him  a  fair  chance  to  accomplish 
his  work.  He  cannot  capriciously  terminate  the  employment 
while  the  negotiations  are  being  carried  on,  but  the  broker 
having  had  a  fair  chance  and  failed,  or  having  abandoned  his 
efforts,  the  principal  is  free  to  treat  with  the  same  customer, 
either  directly  or  through  another  broker  without  liability  to 
the  first  broker.  An  owner  may  employ  several  brokers  to 
sell  the  property  and  the  first  one  who  succeeds  gets  the  re- 
ward. He  may  negotiate  with  purchasers  himself  and  may 
sell  without  the  help  of  any  broker.  An  exclusive  agency  pre- 
vents the  owner  from  employing  other  brokers,  but  does  not 
prevent  a  sale  through  his  own  efforts  free  from  claim  of  com- 
mission unless  the  terms  of  the  exclusive  agency  provide  other- 
wise. 

Duty  of  broker  to  principal. — It  is  the  duty  of  the  broker 
to  act  in  the  best  interests  of  his  employer  and  to  obtain  the 
best  price  and  terms  for  him.  He  is  bound  not  only  to  good 
faith  but  to  reasonable  diligence,  and  to  such  skill  as  is  ordi- 
narily possessed  by  persons  of  common  capacity  engaged  in  the 
same  business.  He  must  follow  instructions  and  not  exceed 
his  authority.  He  must  reveal  to  his  principal  all  informa- 
tion that  may  come  to  him  relating  to  the  transaction  under 
consideration.  Concealing  facts  material  to  the  interests  of 
his  employer  amounts  to  fraud.  The  broker  may,  for  ex- 
ample, know  that  a  prospective  purchaser  has  actual  need 
of  his  employer's  property.  He  should  advise  his  employer 
of  this  in  order  that  the  owner  may  get  a  better  price  or  that 
he  may  not  be  moved  by  arguments  to  accept  a  lower  price. 
The  broker  however  is  not  obliged  to  violate  a  confidence.  If 
he  knows  that  a  prospective  purchaser  is  not  acting  for  him- 
self but  for  some  one  else  and  he  is  in  honor  bound  not  to 
reveal  the  fact,  he  may  withhold  it  but  he  should  apprise  his 
employer  that  he  is  dealing  with  an  undisclosed  principal. 

Statements  made  by  a  broker. — A  broker  makes  many  state- 

"Mears  vs.  Jones,  102  Me.  490. 


150    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

ments  in  the  course  of  negotiations  which  may  be  mere  opinions 
or  arguments  or  "sidewalk  conversation."  He  may  not,  how- 
ever, make  misstatements  of  fact  as  to  material  matters,  and 
a  purchaser  may  disaffirm  a  contract  induced  by  such  misstate- 
ments. If  the  broker  makes  the  misrepresentations  relying  on 
information  furnished  by  the  owner  he  would  be  entitled  to  his 
commission  even  though  the  purchaser  were  relieved  from  the 
contract.  Unauthorized  misstatements  made  by  the  broker, 
with  similar  result,  will  cause  him  to  forfeit  his  rights,  al- 
though if  the  fruit  of  the  broker's  work  is  accepted  by  the 
seller  knowing  of  such  misstatement,  the  broker  may  recover 
commission. 

Misrepresentations  such  as  will  relieve  a  purchaser  from 
a  contract  must  be  as  to  some  material  fact  such  as  the  size 
of  the  plot,  the  terms  of  leases  or  the  restrictive  covenants. 
In  one  case  it  was  shown  that  an  owner  made  an  unintentional 
misrepresentation  of  the  size  of  the  plot.  The  purchaser 
refused  to  sign  the  contract  when  the  real  dimensions  became 
known  and  the  broker  sued  for  commission.  It  was  held  that 
the  broker  was  employed  to  sell  a  certain  piece  of  property 
with  which  he  was  familiar,  that  the  statement  as  to  size  by 
the  owner  was  not  a  warranty,  and  that  the  broker  could  not 


recover  a  commission." 


Termination  of  agency. — The  employment  of  the  broker 
is  not  usually  for  a  definite  time.  It  is  revokable  at  will  in 
good  faith  by  either  party,  or  by  mutual  consent.  If  a  rea- 
sonable period  of  time  has  elapsed  and  the  object  has  not  been 
performed  the  agency  may  be  considered  at  an  end.  It  is 
also  terminated  by  the  death  or  insanity  of  either  party,  by 
bankruptcy  and  by  the  destruction  of  the  subject  matter.  If 
the  transaction  sought  has  been  accomplished,  either  by  the 
broker  himself  or  by  another  broker,  or  by  the  principal,  the 
employment  has  ceased. 

Rates  of  commissions. — The  amount  of  commission  due  a 
broker  on  any  transaction  may  be  fixed  by  a  definite  agreement 
between  the  parties.  In  the  absence  of  an  agreement,  custom 
prevails.  The  rates  established  by  a  real  estate  board  are 
often  evidence  of  the  customs  of  the  business  in  a  particular 
locality.  Schedules  of  charges  approved  by  some  of  the 
boards  are  quoted  at  length  in  the  appendix.28 

"Hausman  vs.  Herdtfelder,  81  App.  Div.  46  (N.  Y.). 
"  See  Appendix,  forms  71-75. 


CHAPTER  XIII 

MANAGEMENT 

Management  as  a  business. — The  management  of  im- 
proved real  property  is  a  branch  of  the  agency  division  of  the 
real  estate  business.  It  engages  the  attention  of  a  number  of 
real  estate  men,  some  of  whom  have  built  up  organizations  of 
marked  efficiency.  These  organizations  offer  to  the  owner  the 
combined  knowledge,  ability  and  experience  of  all  their  mem- 
bers. 

Spear  and  Company  of  New  York  City,  make  the  following 
statement  in  an  issue  of  their  Bulletin: 

"We  believe  that  a  modern  real  estate  organization  should 
be  made  up  of  men  who  combine  integrity  and  good  judgment 
with  a  knowledge  of  real  estate  conditions. 

"We  believe  that  only  through  the  constant  operation  of 
these  qualities  can  successful  management  be  assured. 

"We  believe  that  the  management  of  property  entrusted  to 
us  entails  serious  obligations,  and  that  the  fulfillment  of  these 
obligations  comes  first  and  our  profit  last." 

Principles  governing  management. — There  are  at  least  two 
good  reasons  for  the  employment  of  a  manager  by  an  owner  of 
real  estate.  First,  the  owner  is  relieved  of  the  labor  and  detail 
involved  in  the  collections  of  rents,  the  physical  care  of  the 
property  and  the  keeping  of  accounts.  Secondly,  a  good  man- 
ager is  usually  able  to  make  more  advantageous  leases,  will  lose 
less  rents  through  vacancies,  and  have  lower  expenses  than 
would  an  owner  managing  his  own  property.  There  may  be 
exceptions  to  this  in  the  case  of  owners  having  both  time  and 
real  estate  experiences,  but  reference  is  here  made  to  the  usual 
owner  to  whom  real  estate  is  a  side-issue  or  investment. 

The  work  of  a  management  organization  consists  of  five 
things — 

First:  Marketing  space,  that  is  securing  the  tenants  for 
the  building  at  the  best  rates  obtainable. 

Second:     The  collection  of  the  rents. 

Third:  Purchases  of  supplies  and  equipment  and  expendi- 
tures for  repairs. 

151 


1 5  2    REAL  ES  TA  TE  PRINCIPLES  AND  PR  A  C  TICES 

Fourth:  Physical  care  of  the  premises,  attendance  to  com- 
plaints, and  hiring  of  employees. 

Fifth:     Keeping  proper  accounts. 

There  are  several  classes  of  urban  realty  which  engage  the 
attention  of  expert  managers. 

They  include:  (a)  Apartment  houses;  (b)  Loft  buildings; 
(c)  Office  buildings;  (d)  Stores;  (e)  Dwellings. 

The  property  of  each  of  the  foregoing  classes  has  its  own 
peculiar  problems.  The  methods  used  for  renting  space  and 
retaining  tenants  in  an  apartment  house  differ  from  those  apply- 
ing to  loft  and  office  buildings  but  the  underlying  principles 
are  the  same  as  with  selling  goods,  rentable  space  must  be 
offered  to  the  right  market,  the  prospective  customer  must  be 
reached.  When  secured,  he  must  be  retained,  his  surroundings 
must  be  suitable  to  him,  he  must  be  kept  satisfied  and  last  but 
not  least  he  must  pay  his  rent. 

The  Bulletin  of  Spear  and  Company  may  again  be  quoted : — 

uGood  Management  is  our  vital  concern.  Our  endeavor  is 
first  to  create  a  desire  for  Good  Management  in  the  Owner, 
and  then  to  devote  all  our  effort  and  all  our  energy  to  attain 
that  end. 

"Good  Management  approaches  and  solves,  from  the  ma- 
terial and  practical  side,  th'e  manifold  problems  with  which  the 
owner  is  constantly  confronted,  and  obtains  full  value  for  his 
expenditures  while  keeping  the  ultimate  cost  of  his  building 
within  the  limits  of  normal  appropriation." 

Choice  of  a  manager. — The  choice  of  a  manager  naturally 
requires  careful  thought  on  the  part  of  an  owner.  His  desire 
will  be  to  secure  the  services  of  an  agent  who  will  produce  the 
best  results  with  the  property.  The  results  of  the  agent's  work 
will  be  shown  not  only  in  realizing  the  largest  amount  of  net 
income  obtainable,  but  also  in  the  maintenance  of  the  property 
in  a  normal  and  reasonable  state  of  repair.  The  agent  selected 
by  the  owner  should  be  one  possessing  an  accurate  knowledge 
of  conditions  affecting  rents  so  that  when  space  in  the  building  is 
to  be  rented  a  lease  may  be  made  for  the  owner  on  the  best 
possible  terms.  If  the  owner  or  his  agent  does  not  know  the 
market,  valuable  opportunities  may  be  wasted.  The  know- 
ledge the  agent  should  possess  comes  only  through  experience 
and  by  his  being  in  close  touch  with  the  requirements  of  tenants 
and  the  prices  they  are  willing  to  pay  for  space.  The  agent 
should  be  one  having  trained  assistants  or  associates  to  take  care 


MANAGEMENT  153 

of  each  department  of  his  business,  i.e.,  collections,  repairs,  sup- 
plies, insurance,  accounting  etc.  An  owner,  then,  will  be  careful 
to  seek  an  agent  who  has  the  ability  to  give  successful  manage- 
ment and  an  organization  known  for  its  ability  and  efficiency  in 
handling  real  property. 

Renting  space. — The  landlord's  desire  is  to  rent  his  prop- 
erty so  that  it  will  produce  a  proper  income  on  his  investment; 
the  tenant  wishes  the  use  of  a  certain  amount  of  space  at  the 
lowest  possible  cost  to  him.  In  renting  property,  the  owner's 
interests  are  affected  by  four  things;  the  character  of  the  tenant, 
the  use  to  which  he  will  put  the  property,  the  amount  of  the 
rent  and  the  term  of  the  lease. 

The  more  valuable  a  building,  the  more  important  it  is  to 
safeguard  the  character  of  the  tenancy.  There  is  a  great  deal 
of  property  where  it  makes  little  difference  to  the  landlord  who 
his  tenant  may  be  as  long  as  he  uses  the  property  in  a  lawful 
manner.  On  the  other  hand,  in  some  apartment  houses,  the 
references  of  prospective  tenants  are  carefully  investigated  be- 
fore the  tenant  is  accepted.  In  a  commercial  building  suitable 
for  the  display  of  goods  and  visited  by  men  and  women  buyers, 
it  would  usually  be  unwise  to  rent  space  for  use  as  a  sweatshop. 
Owners  of  buildings  in  a  good  retail  business  section  may  refuse 
to  rent  stores  for  any  business  considered  objectionable.  Briefly 
stated,  it  is  unwise  to  rent  part  of  a  building  for  a  purpose 
which  will  adversely  affect  the  best  interests  of  the  other  tenants 
in  the  building. 

In  making  leases  the  amount  of  the  rent  and  the  length  of 
the  term  are  often  considered  together.  The  landlord  is  en- 
titled to  the  maximum  current  rental.  If  space  is  renting  at  one 
dollar  per  square  foot,  or  if  apartments  in  similar  houses  in 
the  neighborhood  are  renting  at  fifty  dollars  per  month  per 
room,  that  is  what  the  owner  should  receive,  all  conditions  being 
equal.  But  for  how  long  a  term  should  he  make  the  lease?  Is 
it  advisable  to  get  the  tenant  to  sign  a  long  lease  or  a  short  one  ? 
No  general  rule  can  be  laid  down.  It  may  be  suggested  how- 
ever that  in  periods  of  depression,  when  rents  are  low,  the 
owner  may  do  well  to  rent  for  the  current  price  in  order  to 
avoid  loss  through  vacancies,  but  that  he  should  make  the  lease 
for  a  short  term  only.  The  period  of  depression  may  end,  and 
rents  advance  in  a  very  short  time  so  that  when  the  lease  expires 
a  new  lease  may  be  consummated  at  the  proper  and  adequate 
rental.  A  short  time  ago  a  ten-year  lease  was  made  for  part  of 


154   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

a  building  in  Brooklyn  at  about  forty-two  cents  per  square  foot. 
Soon  after  making  the  lease  the  demand  for  space  increased  so 
that  in  the  neighborhood  of  the  building  referred  to,  it  was 
worth  eighty  cents  per  square  foot.  The  lease  was  therefor 
not  a  good  one  for  the  landlord.  In  another  case  a  lease  was 
made  for  five  years  with  a  privilege  of  a  renewal  of  five  years 
more.  Shortly  after  the  lease  was  made  the  tenant  requested 
that  he  be  given  the  privilege  of  an  additional  five  years,  which 
was  granted  him.  Now,  before  the  first  term  of  five  years  is  up, 
the  space  could  be  rented  for  double  its  present  rent,  but  it  is 
tied  up  for  ten  years  more  at  the  low  rental.  This  offers  an 
example  of  an  unwise  lease. 

Mr.  Aaron  Robinowitz  in  an  address  on  "The  Profitable 
Renting  of  Business  Property"  says : — 

"The  secret  of  renting  business  property  lies  in  reducing 
space  to  terms  of  a  tangible  commodity.  Most  people  feel  that 
this  process  is  something  quite  vague  and  not  at  all  a  thing  that 
is  concrete  or  definite.  Actually,  the  sale  of  space  does  not 
differ  from  the  sale  of  other  merchandise,  and  it  responds  to 
much  the  same  treatment.  The  merchant  who  has  fifty  thou- 
sand dollars  worth  of  silk  on  his  shelves,  lays  out  a  campaign  to 
sell  it.  He  has  his  salesmen  call  on  those  buyers  who  can  logi- 
cally use  his  product.  He  wastes  no  time  in  trying  to  sell  his 
silks  to  woolen  buyers,  but  calls  on  a  particular  trade  persist- 
ently until  a  purchaser  is  found  for  his  merchandise. 

"Since  space  is  a  commodity  similar  to  other  merchandise, 
the  same  selling  principles  should  be  applied.  In  selling  this 
space  and  particularly  in  renting  business  property,  it  is  neces- 
sary first  to  determine  the  logical  class  of  tenants  for  a  build- 
ing, and  then  to  canvass  the  merchants  and  manufacturers  in 
this  class  until  the  building  is  rented.  When  we  have  prop- 
erty to  rent  in  any  district,  it  is  presented  to  those  who  are 
logical  tenants  for  this  district.71 

Also:— 

"It  is  plain,  therefore,  that  what  we  have  for  sale  requires 
thorough  analysis  and  is  no  different  from  any  other  commodity 
to  be  marketed,  save  that  a  greater  responsibility  rests  upon  the 
space  salesman  than  upon  the  merchandise  salesman.  For  if 
we  fail  to  sell  a  commercial  product  today  its  value  may  not  be 
diminished  tomorrow.  But  a  day  gone  by  in  the  sale  of  space  is 
a  day  gone  forever — an  income  lost  that  can  never  be  retrieved. 


MANAGEMENT  155 

The  element  of  time  enters  so  largely  into  the  sale  of  space  that 
it  becomes,  in  fact,  the  very  essence  of  our  commodity." 

Collections. — Tenants  are  expected  to  pay  rent  promptly 
when  due,  and  an  alert  manager  will  see  that  they  are  not  per- 
mitted to  get  in  arrears.  A  system  of  collections  will  include 
the  mailing  of  bills  in  advance  of  the  due  date,  calling  on  the 
tenants  who  do  not  remit  by  mail,  personal  letters  asking  for 
payment,  notices  to  delinquents  that  an  action  will  be  taken 
against  them,  and  finally  a  legal  action  itself.  Of  course,  care 
and  judgment  must  be  exercised  in  dealing  with  tenants  regard- 
ing unpaid  rent.  The  agent  should  strive  for  a  good  record 
on  his  collections  and  a  minimum  of  losses  through  bad  debts, 
but  should  be  careful  not  to  antagonize  a  desirable  tenant. 

Expenditures. — To  spend  money  to  operate  and  maintain 
a  building,  but  to  spend  it  wisely  is  part  of  the  manager's  work. 
Many  expenditures  are  routine.  These  include  the  payment 
of  the  wages  of  the  employees,  the  bills  for  light,  heat  and 
power  and  other  recurring  items.  Even  in  these  economy  can 
be  practiced.  Every  employee  should  give  the  time  for  which 
he  is  paid,  and  his  work  should  be  worth  the  pay.  Coal  con- 
tracts may  be  made  so  as  to  obtain  the  fuel  at  lowest  rates  and 
to  get  a  good  quality  of  it.  Checks  on  unnecessary  waste 
should  be  made. 

Bills  for  repairs  and  renewals  are  usual  in  every  building. 
The  building  must  be  maintained  or  it  will  run  down,  tenants 
will  become  dissatisfied,  and  rents  will  decrease.  The  expert 
manager  will  be  familiar  with  the  names  of  a  number  of  good 
repair  men  and  will  be  able  to  specify  just  what  work  is  to  be 
done  and  the  kind  of  material  to  be  used  on  the  job.  He  will 
see  that  he  gets  work  and  materials  of  the  proper  quality  and 
that  he  pays  no  more  than  current  prices  for  them.  It  is  often 
better  to  get  high  grade  work  even  though  it  cost  more  than 
inferior  work,  but  in  any  event  full  value  should  be  received 
for  the  expenditure  of  the  owner's  money. 

Physical  care  of  the  property. — Those  who  manage  prop- 
erty are  usually  charged  with  its  physical  care.  They  must 
maintain  the  character  of  the  building  in  order  that  it  shall  not 
depreciate  in  value,  that  desirable  tenants  be  attracted  to  it  and 
retained  and  to  avoid  liability  for  damages  arising  from  neglect. 

The  building  should  be  kept  clean  and  attractive  in  appear- 
ance, inside  and  out.  Paint  should  be  applied  as  soon  as  re- 
quired. Paint  covers  dirt  and  stains  and  prevents  rust  and 


1 5  6    REAL  ES  TA  TE  PRINCIPLES  AND  PR  A  C  TICES 

decay.  The  janitor  and  his  assistants  should  be  industrious 
and  constantly  alert.  Unsanitary  conditions  must  be  avoided. 
Leaking  water  supply  pipes,  waste  pipes,  and  steam  pipes 
should  receive  immediate  attention.  Halls  should  be  kept 
lighted,  and  elevators  running.  Other  parts  of  the  building  to 
receive  attention  are  roofs,  stairs,  steam  boilers  and  radiators, 
skylights,  doors  and  windows,  etc.  Many  of  the  things  men- 
tioned apply  only  to  those  buildings  rented  to  several  tenants 
and  where  the  landlord  controls  portions  of  the  building.  In 
some  cases  the  landlord  makes  no  repairs  and  is  not  liable  for 
damages.  The  question  of  liability  for  damages  has  been  more 
fully  discussed  in  the  chapter  on  Leases. 

Accounting. — Accounts  with  tenants  are  usually  kept  in  a 
loose  leaf  ledger.  There  is  a  master  sheet  on  which  is  written 
as  a  heading  the  location  of  the  building.  There  will  be 
columns  in  which  are  listed  first,  the  floor,  apartment,  office,  or 
other  portion  of  the  building  rented  separately,  then  opposite 
these  the  names  of  the  tenants,  the  monthly  rents,  and  the 
particulars  of  the  lease.  Inserted  in  the  binder  will  be  narrow 
leaves  headed  with  the  months,  several  months  on  a  page,  and 
which  will  show  the  debit  to  the  tenant  for  the  month,  the  pay- 
ment credited  and  the  balance,  if  any,  carried  over.  The  account 
with  the  tenant  is  read  across  and  by  the  insertion  of  additional 
narrow  leaves  the  necessity  of  re-writing  the  master  sheet  is 
avoided. 

The  account  with  the  owner  is  simply  a  debit  and  credit 
ledger  account.  He  is  credited  for  all  rent  collected  and  ex- 
penses refunded.  He  is  debited  with  the  various  expenditures 
made  for  him  and  with  the  amount  of  the  agent's  commission. 
An  abstract  of  the  account  with  vouchers  and  a  check  for  the 
balance  is  regularly  sent  him,  usually  each  month. 

Insurance. — Owners  carry  for  their  protection  various  kinds 
of  insurance.  Among  them  are  fire,  liability,  plate  glass,  ele- 
vator, steam  boiler,  workman's  compensation  and  rent  insur- 
ance. The  agent  can  assist  in  keeping  fire  insurance  premiums 
down  to  a  minimum  by  eliminating  fire  hazards  as  much  as  pos- 
sible. Sometimes  the  character  of  a  tenant's  business  increases 
the  insurance  rate  on  the  building.  This  should  be  recognized 
in  making  the  lease  with  such  tenant,  possibly  by  having  him 
agree  to  pay  the  additional  premium  caused  by  his  occupancy. 
A  study  of  the  rate  schedule  for  the  building  may  suggest 
methods  of  securing  reductions  in  the  rate.  Liability  insurance 


MANAGEMENT  157 

is  carried  so  that  any  claim  for  damages  is  defended  by  the 
insurance  company  and  loss,  if  any,  paid  by  it.  Plate  glass  in- 
surance is  against  breakage.  Sometimes  the  tenant  pays  the 
premium  on  it  as  additional  rent.  Elevator,  steam  boiler  and 
workman's  compensation  insurance  are  important,  the  last  men- 
tioned being  required  by  law.  Rent  insurance  is  entirely 
optional  with  the  owner.  Many  do  not  carry  it,  being  willing 
to  assume  the  risk  of  a  loss  of  rents  due  to  a  fire. 

Agent's  relations  with  the  tenant. — The  agent  seeks  to  keep 
his  tenants  satisfied.  He  should  give  them  opportunity  to  make 
complaints.  Sometimes  blanks  are  furnished  tenants  for  the 
purpose  of  writing  out  complaints.  If  a  tenant  calls  in  person, 
or  by  telephone  his  complaint  should  receive  respectful  atten- 
tion and  a  prompt  investigation.  The  janitor  should  be  in- 
structed to  report  complaints,  and  so  also  should  collectors  and 
inspectors  who  get  the  complaints  on  their  visits  to  the  building. 
Attention  to  complaints  does  not  mean  that  the  tenant  gets  all 
he  asks  for,  but  it  does  mean  that  an  improper  condition  will 
be  remedied.  The  landlord  is  the  one  the  agent  represents  and 
it  is  concern  for  the  landlord's  best  interests  which  will  govern 
the  agent  in  his  relations  with  the  tenants.  Forms  of  a  com- 
plaint blank  and  repair  blank  are  reproduced  in  the  appendix. 
(Forms  80  and  81.) 

Agent's  relations  with  the  owner. — It  is  advisable  for  the 
agent  to  make  a  contract  of  employment  with  the  owner  (ap- 
pendix form  79).  Having  made  the  contract,  the  agent  will 
use  his  efforts  to  give  the  owner  efficient,  honest  and,  successful 
services.  He  will  build  up  a  clientele  if  he  can  prove  the  value 
of  his  work  and  satisfy  his  employer. 

Compensation  of  manager. — The  compensation  of  the  real 
estate  manager  for  the  service  he  renders  consists  of  commis- 
sions for  rentals  made  and  a  percentage  of  the  gross  rents  col- 
lected. The  contract  of  employment  will  govern  the  rate  to  be 
charged  and  such  rate  will  usually  be  that  fixed  by  the  real 
estate  board  or  the  customs  of  the  business  in  the  locality. 


CHAPTER  XIV 
THE  VALUATION  OF  REAL  ESTATE 

Theory  of  land  values. — Agricultural  land  has  value  because 
of  its  fertility,  that  is,  its  ability  to  yield  produce  for  its  owners. 
However,  the  most  fertile  land  is  not  always  the  most  valu- 
able. Proximity  to  communities  and  to  means  of  transporta- 
tion makes  some  agricultural  land  more  valuable  than  other 
land,  more  fertile  but  also  more  remote.  In  cities,  towns  and 
villages,  land  is  of  use  chiefly  for  placing  buildings  upon  it. 
The  use  to  which  such  buildings  may  be  put  determines  the 
value  of  the  land  in  relation  to  the  other  land  in  the  community 
and  their  use  depends  to  a  great  extent  upon  their  location. 

Actual  or  potential  rent  a  measure  of  value. — The  value  of 
land  in  the  final  analysis  is  the  amount  of  its  economic  or  ground 
rent  capitalized.  In  the  case  of  farm  land  its  fertility  and 
accessibility  determine  its  rent.  Urban  land  must  usually  be 
improved  with  buildings  in  order  to  produce  rent,  but  even  if 
unimproved  it  has  a  potential  rent  which  would  be  made  actual 
if  a  suitable  improvement  were  made  upon  it.  The  amount  of 
ground  rent  of  a  parcel  of  urban  land  is  the  total  amount  of 
the  gross  rent  derived  from  the  land  and  building  less  actual 
expenses,  charges  and  taxes,  and  after  deducting  interest  on 
the  cost  of  the  building  and  a  sufficient  amount  for  depreciation 
of  the  building.  The  net  amount  after  such  deductions  would 
represent  the  amount  paid  for  the  use  of  the  land  or  the  loca- 
tion, that  is  to  say,  it  is  the  economic  or  ground  rent.  The 
value  is  obtained  by  considering  the  ground  rent  to  be  the 
income  on  the  sum  at  a  fixed  percentage.  The  percentage  used 
should  be  the  prevailing  average  rate  of  interest  on  invest- 
ments. However,  the  same  interest  rate  cannot  be  used  in 
connection  with  property  of  all  classes.  Some  property,  such 
as  that  used  for  financial  or  business  purposes,  is  of  a  very 
high  type  and  its  value  is  stable  or  increasing,  and  the  rate  of 
return  on  it  would  be  low  compared  with  that  from  other 
property  in  the  same  manner  as  the  return  on  high-class  bonds 
and  other  securities  is  relatively  low.  Other  property,  such 
as  that  used  for  cheap  tenements,  may  be  considered  to  have 

158 


THE  VALUATION  OF  REAL  ESTATE       159 

reached  its  maximum  value  and  may  be  adversely  affected  by 
changing  conditions.  The  rate  of  return  on  property  of  the 
latter  class  should  be  higher  as  having  an  element  of  greater 
risk  for  the  investor.  In  any  case  to  obtain  the  maximum 
ground  rent  the  building  should  be  the  suitable  improvement 
for  the  location  and  should  be  managed  in  such  a  way  as  to 
obtain  the  best  income  possible. 

Comparisons  of  values  with  respect  to  use  of  land. — The 
rent  paid  depends  on  the  location  of  the  land.  Highest  rents 
and  consequently  greatest  values  are  found  in  those  places 
where  the  most  lucrative  businesses  are  conducted,  and  values 
grade  down  to  the  places  where  a  great  deal  of  space  produces 
only  a  small  return.  In  valuing  improved  property,  the  land 
and  the  building  must  be  considered  separately.  It' costs  no 
more  to  erect  a  building  in  a  good  location  than  in  a  poor  one. 

The  following  list  shows  the  relative  value  of  land  based 
on  location  and  use. 

a.  Financial  centers  such  as  Wall  Street  and  the  adjoining 

streets  in  New  York  City. 

b.  High-class  retail  business.    In  places  where  there  is  no 

financial  center,  this  is  usually  the  most  valuable 
land. 

c.  High-class  residential  property,  used  by  people  who 

will  pay  high  prices  for  exclusive  surroundings. 

d.  Land  used   for  hotels,   the  better   residential   apart- 

ments, and  office  buildings  outside  the  financial 
district. 

e.  Wholesale  business  districts.     Often  the  best  land  for 

wholesale  business  is  that  which  is  next  to  the  retail 
district. 

f.  Land  useful  for  ordinary  tenement  purposes,  from  the 

moderately  priced  apartment  down  to  the  cheapest 
type  of  flat  or  tenement;  also  land  used  for  small 
residences,  the  latter  being  usually  less  valuable  than 
the  land  for  tenements. 

g.  Land  for  suburban  or  detached  residences, 
h.  Land  for  factory  purposes. 

i.    Farm  lands. 

j.    Timber  lands. 

k.  Grazing  land  and  waste  land. 

Structure  of  cities  and  their  direction  of  growth. — The 


160    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

location  and  creation  of  very  few  communities  have  been  the 
result  of  a  preconceived  plan;  neither  did  they  come  into  being 
accidentally.  Their  existence  and  location  have  been  due  to 
influences  of  various  kinds.  In  ancient  times,  defense  against 
enemies  drew  people  together  and  led  them  to  place  their 
towns  at  points  of  advantage.  London  was  located  in  a  swamp, 
Paris  on  an  island.  Commerce  and  manufactures  have  long 
been  factors  in  creating  cities  and  so  have  political,  social  and 
religious  influences.  Trade  routes  have  often  located  cities  at 
points  where  a  break  in  the  method  of  transportation  occurs. 
This  is  illustrated  by  seaports  where  ships  load  and  unload 
their  cargoes,  much  of  which  is  transshipped  by  rail;  by  cities 
at  the  head  of  navigation  on  a  river  and  by  those  at  the  inter- 
section of  important  highways  and  railroads. 

A  city  usually  commences  at  that  point  which  is  most  con- 
venient for  its  intercourse  with  the  rest  of  the  world.  This 
point  may  be  deep  water  alongside  of  solid  ground  or  other 
considerations  of  a  physical  nature.  The  fort,  as  a  means  of 
defense,  was  of  course  the  factor  determining  the  starting-point 
of  some  early  towns. 

Geographical  and  topographical  conditions  and  lines  of 
transportation  affect  the  growth  of  a  city  away  from  its  start- 
ing-point. Growth  in  cities  has  been  described  by  Mr.  Richard 
M.  Hurd  in  ''Principles  of  City  Land  Values"  as  of  two  kinds, 
central  growth  which  takes  place  from  the  heart  and  from 
sub-centers  of  attraction,  and  axial  growth,  which  pushes  out- 
wardly along  highways,  street  railways,  and  railroads.  Central 
growth,  he  says,  is  due  to  proximity  and  axial  growth  to 
accessibility. 

The  influences  which  cause  the  city's  growth  often  overlap 
and  are  harmonized  as  they  come  together.  Business  stays 
near  the  center,  residences  are  forced  to  the  outskirts,  and 
other  utilities  find  their  most  advantageous  locations.  Retail 
shops  follow  into  or  near  new  residential  districts.  Important 
stores  are  located  in  the  places  where  they  are  accessible  to  the 
greatest  number  of  the  people  who  patronize  them;  whole- 
salers desire  nearness  to  their  customers  (the  retailers)  ;  man- 
ufacturers locate  because  of  transportation  or  water-power,  or 
some  other  reason ;  banks,  hotels,  theaters  and  public  buildings 
seek  the  heart  of  a  city  or  an  important  sub-center.  All  of 
these  influences  in  a  great  and  growing  city  affect  its  structure. 
They  are  complex  and  counteracting  and  are  constantly  at  work, 


THE  VALUATION  OF  REAL  ESTATE       161 

and  they  are  at  all  times  being  acted  upon  by  the  topographical 
features  of  the  land  such  as  bodies  of  water,  hills  and  valleys. 

General  rules  for  determining  land  values. — As  has  already 
been  noted,  ground  rent  capitalized  at  an  appropriate  rate  is 
the  real  basis  of  land  value.  There  is  another  basis  of  value 
known  as  exchange  value;  it  is  the  value  which  is  indicated  by 
sales  prices,  the  prices  at  which  similar  land  has  been  bought  and 
sold.  There  is  no  such  thing  as  an  exact  valuation  of  a  piece  of 
property,  and  an  appraisal  of  it  is  nothing  more  t!han  an  opinion 
(although  it  may  be  that  of  an  expert)  as  to  its  value.  There 
are  certain  rules,  however,  that  may  be  used  as  guides  in  deter- 
mining land  values. 

Value  has  been  defined  as  the  price  a  purchaser  who  wishes 
to  buy,  but  who  does  not  have  to  buy,  will  pay  to  a  seller  who 
wishes  to  sell  but  who  does  not  have  to  sell.  In  seeking  to 
ascertain  the  value  of  any  piece  of  property  consideration 
should  be  given  to  the  prices  at  which  property,  of  the  same 
character  has  been  sold,  provided  the  parties  to  such  sales  have 
been  willing  buyers  and  sellers.  Actual  sales  are  an  excellent 
criterion  of  value.  The  expert  in  a  proceeding  under  which 
land  is  taken  for  public  purposes  adds  weight  to  his  appraisal 
by  getting  on  the  record  testimony  of  sales  he  has  made  or 
those  of  which  he  has  knowledge.  Ultimately,  values  as  in- 
dicated by  sales  prices  and  those  based  on  capitalized  rentals 
will  be  equal,  but  at  a  given  time  the  prices  paid  for  land  are 
often  the  expression  of  opinion  of  what  it  will  be  worth.  The 
trend  of  a  city's  development  may  be  anticipated  and  the 
future  value  of  land  discounted.  The  desire  to  anticipate 
values  has  at  times  led  to  speculation  and  to  the  selling  of 
land  at  prices  far  in  excess  of  actual  value.  The  last  buyers 
on  a  wave  of  speculation  often  find  themselves  possessed  of  land 
at  prices  which  will  not  measure  true  value  until  years  later. 

In  placing  a  value  on  a  piece  of  land,  care  should  be  taken 
to  ascertain  any  special  features  affecting  it.  This  includes  both 
its  physical  characteristics  and  its  surroundings.  Standard  lot 
values  usually  mean  values  of  the  lots  at  grade,  that  is,  on  a 
level  with  the  grade  of  the  street.  A  piece  of  land  above  grade 
has  a  feature  which  detracts  from  its  value — there  will  be 
some  expense  in  removing  the  surplus  soil.  If  the  material  to 
be  removed  to  bring  the  lot  down  to  grade,  or  to  excavate  for 
a  building  foundation,  is  rock,  the  added  expense  will  be  high 
and  a  very  large  deduction  from  the  value  of  the  ordinary 


162    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

lot  must  be  made  for  it.  The  same  principle  would  apply  to 
land  much  below  grade  or  having  a  muddy  bottom.  These 
conditions  would  require  filling  in  and  consequent  expense,  and 
may  even  make  the  site  unsuitable  for  building  purposes  for 
some  time  to  come. 

Nuisances  in  the  neighborhood  detract  from  values.  Any- 
thing noisy,  unsightly,  malodorous,  or  in  any  way  objectionable 
to  the  senses  makes  the  locality  less  desirable  for  many  pur- 
poses. Some  businesses  and  manufacturing  establishments  are 
considered  nuisances,  and  to  a  certain  degree  so  may  schools, 
hospitals  and  other  public  institutions.  It  is  of  course  fair  to 
compare  sales  prices  of  property  affected  by  similar  adverse 
conditions,  but  in  making  comparisons  with  property  free  from 
defects  and  detracting  influences,  due  allowance  should  be  made 
for  them. 

The  careful  appraiser  will  note  the  presence  or  absence  of 
street  improvements,  i.e.  sidewalks,  curbs,  pavement,  sewers, 
water  pipes,  electric  light,  and  gas  mains.  He  will  also  con- 
sider any  limitation  on  the  use  to  which  the  property  may  be 
put  by  reason  of  private  restrictions  and  restrictions  imposed 
by  governmental  authority.  (In  New  York  City,  for  example, 
the  zoning  resolutions  adopted  by  the  Board  of  Estimate  and 
Apportionment  restrict  to  certain  uses  a  large  part  of  the  land 
within  the  city  limits.) 

It  may  be  further  noted  that  the  trend  of  population  or  of 
business  towards  a  locality,  and  existing  and  projected  lines  of 
transportation  usually  cause  an  upward  trend  of  values.  The 
change  or  discontinuance  of  certain  means  of  transportation 
(or  points  of  transfer  from  one  kind  of  conveyance  to  another) 
may  have  the  effect  of  reducing  values  of  the  property  which 
is  adversely  affected  by  such  changes. 

Prices  paid  at  auction  sales. — The  prices  paid  for  property 
at  auction  sales  are  not  usually  true  indications  of  value.  The 
sale  may  be  an  involuntary  one,  as  for  instance,  a  sale  resulting 
from  the  foreclosure  of  a  mortgage.  The  property  may  be 
bid  in  by  someone  having  a  claim  against  it  and  the  full  cost 
to  the  purchaser  would  be  the  bid  price  plus  the  amount  of  his 
claim.  The  public  is  not  attracted  to  such  sales  unless  the 
property  is  especially  desirable.  Voluntary  auction  sales  are 
usually  widely  advertised  and  there  is  more  competition  in  the 
bidding.  A  large  crowd  and  spirited  bidding  may  in  some 
cases  produce  prices  in  excess  of  actual  value,  although  even 


THE  VALUATION  OF  REAL  ESTATE       163 

under  favorable  circumstances  sales  may  be  made  at  low  prices. 

The  unit  of  value. — In  estimating  land  values,  some  unit  of 
value  must  be  used.  In  country  districts  this  may  be  the  acre, 
and  land  is  often  quoted  as  so  much  per  acre.  Land  in  most 
communities  is  divided  into  lots  of  standard  size.  These  are 
said  to  be  typical  lots.  The  typical  or  standard  size  lot  in  most 
cities  is  twenty-five  feet  in  width  front  and  rear,  by  one  hundred 
feet  in  depth,  the  side  lines  being  at  right  angles  to  the  street, 
or  parallel  with  the  cross  street.  In  some,  the  typical  lot  is 
twenty  feet  wide  by  one  hundred  feet  deep.  In  others  it  is 
fifty  feet  wide  by  one  hundred  feet  deep.  The  first  step  in 
valuing  a  plot  is  to  determine  the  value  of  a  typical  lot  in  the 
immediate  vicinity  and  compare  it  with  the  plot  under  con- 
sideration, making  allowance  for  any  special  features  affecting  it. 

Lots  of  greater  or  less  depth  than  a  typical  lot. — All  lots 
have  not  the  same  depth  as  the  standard  lot  and  the  problem 
very  often  is  to  assign  a  value  to  a  shorter  or  deeper  lot.  No 
absolute  rule  that  will  fit  every  case  can  be  laid  down,  but  rules 
have  been  adopted  by  experts  which  are  widely  used  and  have 
been  proved  fairly  accurate.  They  are  based  on  the  theory 
that  the  portion  of  the  lot  nearest  to  the  street  is  the  most 
valuable  part  and  the  rear  the  least  valuable.  When  you 
shorten  a  lot  you  take  from  its  value,  but  as  you  still  have 
frontage  on  the  street  the  value  has  not  been  diminished  pro- 
portionately with  the  area.  Thus  a  lot  20  x  80  containing 
1,600  square  feet  usually  is  worth  more  than  80  per  cent  of  the 
value  of  a  lot  20  x  100  containing  2,000  square  feet. 

The  location  of  the  short  lot  may  have  a  great  deal  to  do 
with  its  relative  value.  If  the  proper  improvement  for  it 
would  be  shops  or  stores,  it  might  be  almost  as  valuable  as  a 
full  depth  lot;  if  a  tenement  house,  it  might  be  altogether 
unsuited  by  reason  of  the  laws  governing  the  erection  of  tene- 
ment houses,  and  also  because  of  the  possibility  that  the 
building  would  not  pay  an  adequate  return  on  cost. 

The  Hoffman  and  Davies  rules. — In  attempting  to  deter- 
mine the  relation  of  the  parts  of  a  lot  to  each  other  and  to  the 
total  value,  appraisers  have  established  certain  rules  by  a  system 
of  inductive  reasoning.  The  rule  most  frequently  referred  to 
in  New  York  is  known  as  the  "Hoffman  rule,"  compiled  by 
Murray  Hoffman,  a  corporation  counsel  for  the  City  of  New 
York,  who  acted  for  a  time  as  commissioner  in  condemnation 
proceedings.  He  divides  a  typical  lot  into  strips  five  feet  wide 


164    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

across  the  lot,  and  then  arbitrarily  assigns  values  to  each  of 
those  strips,  premising  that  each  part  of  those  five-foot  strips 
would  be  of  equal  value  throughout. 

More  recently  William  E.  Davies,  a  real  estate  broker  of 
experience  in  New  York  City,  worked  out  and  published  a 
rule  agreeing  in  many  particulars  with  the  Hoffman  rule,  and 
better  in  some  respects,  because  it  ascribes  a  value  to  each  foot 
in  the  lot,  instead  of  assuming  that  every  foot  of  each  five-foot 
strip  is  of  the  same  value.  He  has  also  made  allowance  for  a 
modern  condition  which  did  not  exist  when  Mr.  Hoffman's 
table  was  made;  that  is  the  added  worth  of  the  land  back  of  a 
line  one  hundred  feet  from  the  street,  which  has  arisen  by 
reason  of  modern  conditions.  Mr.  Davies  has  allowed  for 
the  fact  that  a  lot  may  now  be  two  hundred  feet  deep,  and  the 
land  all  the  way  back  may  have  value. 

Tables  showing  values  as  fixed  by  the  Hoffman  rule  and  the 
Davies  rule  are  given  in  the  Appendix  (forms  83  and  84). 

Value  affected  by  width  and  shape  of  lot. — Just  as  all  lots 
are  not  of  the  same  depth  as  the  standard  lot,  it  is  also  true 
that  all  lots  are  not  of  the  standard  width.  No  rule  can  be 
laid  down  which  can  be  applied  in  every  case  to  determine  the 
relative  value  of  lots  of  greater  or  less  width  than  the  standard 
lot.  The  use  to  which  the  plot  should  be  put  to  produce  the 
greatest  rent  will  usually  be  the  determining  factor. 

Some  lots  can  be  valued  on  the  basis  of  so  much  per  front 
foot  regardless  of  width.  A  narrow  lot  (unless  it  be  so  narrow 
as  to  be  practically  useless)  under  such  circumstances  would 
have  a  value  in  direct  proportion  to  its  width.  An  example  of 
this  is  land  fronting  on  a  street  where  small  retail  shops  are 
located.  There  are  many  locations  however  where  width  is 
important  and  where  narrow  lots  have  less  relative  value.  This 
is  the  case  in  localities  suitable  for  buildings  requiring  large 
units  of  land.  An  isolated  narrow  lot  could  not  here  be  valued 
on  the  same  basis  as  larger  units.  In  the  ordinary  dwelling 
house  neighborhood  values  usually  run  proportionate  to  width. 

There  are  some  plots  of  irregular  shape.  Average  width 
and  average  depth  is  ascertained  and  values  computed  on  that 
basis.  Lots  that  are  merely  gores  or  so  irregular  as  to  be 
incapable  of  use,  and  interior  plots  having  no  street  frontage 
are  difficult  to  appraise  independently,  being  of  value  only 
when  combined  with  adjoining  land. 

Plottage. — Two  or  more  adjoining  lots  taken  together  have 


THE  VALUATION  OF  REAL  ESTATE       165 

an  added  value  known  as  plottage.  The  added  value  is  due  to 
the  fact  that  the  plot  of  two  lots  or  more  may  be  used  or 
improved  to  greater  advantage.  A  building  of  greater  size 
and  capable  of  producing  a  larger  net  rental  may  be  erected  on 
the  larger  plot.  In  some  localities  the  suitable  improvement 
may  be  an  apartment  house  of  not  less  than  fifty  feet  in  width, 
in  others  it  is  the  loft  building,  office  building,  hotel,  manu- 
facturing plant,  or  something  else  requiring  a  large  amount  of 
ground  space.  Plottage  is  therefore  of  great  value  in  such  a 
locality.  At  other  places,  small  dwellings  are  erected,  each 
on  one  lot;  plottage  is  not  quite  so  important  here,  but  it  gives 
some  added  value  because  of  the  economy  of  building  and 
marketing  a  number  of  adjoining  houses  at  the  same  time 
Even  in  farm  land,  or  acreage,  large  unbroken  tracts  are 
advantageous. 

The  added  value  due  to  plottage  is  usually  figured  to  be  ten 
per  cent  of  the  total  value  of  the  separate  lots.  It  may  be 
more  than  this  amount  in  locations  where  great  and  important 
structures  are  erected,  and  less  in  those  places  where  land  is 
plentiful  and  large  plots  easily  assembled.  In  a  recent  pro- 
ceeding involving  the  valuation  of  the  Equitable  Building  in 
New  York  City,  it  was  held  that  there  was  an  additional  value 
due  to  plottage,  but  that  it  was  not  as  much  as  twenty-five  per 
cent. 

Corners  and  corner  influence. — Corner  lots,  that  is  those 
located  at  the  intersection  of  two  streets  are  worth  more  than 
the  ordinary  inside  lot.  The  amount  of  additional  value  given 
to  a  corner  depends  upon  the  importance  of  the  intersecting 
streets,  and  the  use  for  which  the  property  is  suitable.  This 
additional  value  is  usually  considered  to  be  fifty  per  cent  of  the 
inside  lot  value,  but  is  more  in  a  few  cases  and  less  in  others. 
In  exceptional  locations  the  value  of  the  corner  lot  may  be  two 
or  three  times  the  value  of  an  inside  lot. 

The  reasons  why  corner  lots  have  added  value  may  be  sum- 
marized as  follows: 

(a)  They  are  usually  more  suitable  for  improvement  with 
a  building  covering  a  larger  proportion  of  the  surface 
of  the  lot,  and  sometimes  a  building  of  a  greater 
height,  than  are  inside  lots.  Where  there  are  laws 
restricting  the  amount  of  land  surface  to  be  covered, 
corner  lots  are  allowed  a  greater  percentage  than 
inside  lots. 


166    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

(b)  There  is  a  greater  amount  of  permanent  air  and  light 

for  corner  buildings,  especially  in  places  where  build- 
ings are  erected  in  attached  rows. 

(c)  There  is  a  greater  amount  of  window  space  for  display 

of  goods  in  corner  stores;  and  they  are  more  con- 
spicuous and  more  readily  attract  trade. 

(d)  If  both  intersecting  streets  are  important,  the  corner 

lot  gets  the  benefit  of  fronting  on  both. 

(e)  Passengers  get  on  and  off  of  street  cars  at  corners  and 

stations  for  elevated  roads  and  subways  are  located 
there. 

(f )  Additional  light  and  air  and  favor  of  position  is  incident 

to  a  corner  even  in  residential  districts. 

Of  course  space  in  buildings  erected  on  corners  pays  a  larger 
rent,  which  means  greater  value,  but  the  larger  rent  is  by 
reason  of  the  advantages  here  enumerated. 

Corner  influence  is  simply  that  element  of  additional  value 
flowing  from  proximity  to  the  corner.  The  lot  next  to  the 
corner  partakes  of  some  of  the  advantages  of  the  corner  but  in 
a  much  smaller  degree.  This  addition  to  a  lot  value  is  often 
considered  to  be  ten  per  cent. 

Illustration  of  method  of  computing  valuations. — As  an 
illustration  of  some  of  the  principles  involved  in  an  appraisal 
the  following  diagram  and  figures  may  be  considered.  Let  it 
be  assumed  that  the  property  fronts  on  a  business  street  and 
that  inside  lots  are  worth  ten  thousand  dollars  each.  The 
Davies  rule  for  valuing  the  short  lots  will  be  used. 


Main  Street 


B5 

^5 

25 

E5 

25 

85 

S5 

85 

o 

1 

g 

CO 

CO 

CO 

0 

a> 

2 

§ 

CO 

CO      00 

arden 

s 

DO 

CO 

A 

B 

C 

D 

E 

F 

G 

B 

H 

d- 

CD 

H 

CD 

a 

^--—-J 

c^ 

0 

.  —  ^ 

^-—  -1 

^~~  -^ 

,p--f^r 

^--^ 

^-  —  ' 

THE  VALUATION  OF  REAL  ESTATE       167 

Full   size  inside   lot  value   $10,000. 

Lot  A    Average  depth  98  feet — Value  98.8%    $9,830 

Add  50%  for  corner   4,940^     $14,820 

B     Average  depth  94  feet^Value  96.4%    9,640 

Add  10%  for  corner  influence 964         10,604 

C     Average  depth  90  feet— Value  94%     9,400 

D     Average  depth  86  feet— Value  91.6%    9,160 

E     Average  depth  82  feet— Value  89%     8,900 

F     Average  depth  78  feet— Value  86.2%    8,620 

G    Average  depth  74  feet— Value  83.4%    8,340 

Add  10%  for  corner  influence  834           9,174 

H    Average  depth  70  feet— Value  80.6%    8,060 

Add  50%  for  corner  4,030         12,090 

$82,768 
Add   10%  for  plottage    8,276 

Total   value   of  plot    $91,044 

The  average  depth  of  the  entire  plot  is  84  feet,  and  its  area 
is  16,800  square  feet.  If  the  value  was  computed  on  the  basis 
of  area  alone  it  would  amount  to  $67,200  or  $4  per  square 
foot.  On  the  basis  of  value  as  illustrated  the  amount  is 
$91,044  or  over  $5.40  per  square  foot. 

Valuation  of  improved  property. — Some  principles  govern- 
ing the  valuation  of  land  having  been  laid  down,  consideration 
may  be  given  to  the  valuation  of  the  buildings  on  the  land. 
These  principles  may  be  stated  as  follows : 

(a)  It  should  first  be  determined  whether  the  building  is 

the  proper  or  adequate  improvement,  that  is,  whether 
it  is  the  improvement  which  yields  the  greatest 
amount  of  economic  or  ground  rent.  Such  a  building 
will  be  the  one  which,  as  an  income  producer,  is  most 
suited  to  the  neighborhood. 

(b)  If  a  building  is  the  adequate  improvement  for  the  plot 

it  is  worth  its  cost  to  produce  minus  a  reasonable 
allowance  for  depreciation. 

(c)  The  cost  of  a  building  can  be  computed  to  a  fair  degree 

of  accuracy  by  means  of  factors  determined  by  ex- 
perience. These  factors  are  applied  to  the  number 
of  square  feet  of  floor  surface  in  the  building,  or  to 
the  number  of  cubic  feet  contained  within  its  walls, 
the  result  being  estimated  cost. 


168    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

(d)  Buildings  cease  to  be  adequate  improvement  when  the 

land  (i.e.  the  location)  is  suited  for  a  building  of  a 
higher  type.  The  condition  is  usually  progressive 
and  is  indicated  by  increasing  land  values. 

(e)  It  is  usual  to  value  first  the  land  and  then  the  land  and 

building  together.  The  difference  will  be  the  amount 
of  value  the  building  adds  to  the  land.  In  the  case 
of  new  buildings  and  those  which  are  the  proper 
improvement  the  amount  of  value  the  building  adds 
to  the  land  equals  the  amount  it  cost  to  construct. 
In  the  case  of  old  or  obsolete  buildings,  or  those  not 
proper  improvements  for  the  site,  it  will  be  an 
amount  much  less  than  cost. 

(f)  Consideration  should  be  given  to  fluctuations  in  the  cost 

of  labor  and  materials  entering  into  building  con- 
struction. Buildings  produced  in  periods  of  low 
costs,  if  they  remain  the  proper  improvement,  in- 
crease in  value  with  increasing  costs,  and  conversely 
if  they  are  produced  when  costs  are  high  these  values 
drop  with  falling  labor  and  material  costs.  It  may 
be  considered  that  reproduction  costs  are  the  ones  to 
be  considered  rather  than  original  costs,  although 
prices  resulting  from  sudden  and  extreme  changes  are 
not  safe  guides. 
As  an  illustration  of  an  example  of  a  building  ceasing  to  be 

the  proper  improvement,  it  may  be  assumed  that  a  given  piece 

of  property  when  new  was  valued : 

Land   $5,000 

Building  (cost)   20,000 


Total $25,000 

Let  us  assume  that  five  years  later  lots  had  become  worth 
$10,000  due  to  the  fact  that  the  locality  had  become  suitable 
for  a  higher  type  of  improvement.  The  property  under  con- 
sideration, as  a  whole,  would  not  have  increased  in  value, 
however,  as  it  produces  the  same  rental  as  formerly.  The 
valuation  can  now  be  stated  to  be : 

Land   $10,000 

Building 15,000 


Total $25,000 


THE  rALUATION  OF  REAL  ESTATE        169 

The  building  at  this  point  adds  $15,000  only  to  the  value  of 
the  land.  Let  us  further  consider  that  at  a  later  period  the 
total  value  would  be  divided: 

Land    $24,000 

Building 1,000 


Total $25,000 

The  plot  has  by  this  time  become  so  valuable  that  the  building 
adds  to  it  only  a  nominal  amount.  It  has  practically  reached 
the  time  when  it  should  be  torn  down  to  make  way  for  a  suitable 
improvement.  When  that  time  arrives,  the  value  of  the  old 
building,  even  though  it  may  be  physically  in  good  condition, 
can  be  said  to  have  merged  in  the  value  of  the  land. 

Cost  of  buildings. — The  estimation  of  the  cost  of  a  new 
building  involves  a  computation  of  the  cubic  contents  of  the 
building  or  the  number  of  square  feet  of  floor  surface,  and  the 
use  of  the  correct  unit  cost  factor.  These  factors  are  deter- 
mined by  experience  and  of  course  vary  with  material  and  labor 
prices. 

The  cubic  contents  of  a  building  are  obtained  by  multiplying 
together  the  figures  representing  its  width,  depth  and  height. 
The  number  of  square  feet  of  floor  surface  in  the  building  is  the 
product  of  the  width  by  the  depth  by  the  number  of  floors. 
The  computations  are  easy  in  the  case  of  rectangular  buildings 
but  involve  some  complications  in  the  case  of  those  of  irregular 
shape.  The  figures  may  be  obtained  from  the  architect's  plans 
for  the  building  or  from  actual  measurements. 

Experience  with  actual  costs  of  buildings  of  certain  types  and 
standards  lead  architects,  builders  and  appraisers  to  become 
familiar  with  the  average  costs  of  such  buildings  per  cubic  foot 
or  square  foot.  These  units  are  the  factors  which  are  applied 
to  the  building  under  consideration.  If  the  correct  type  has 
been  determined  it  is  merely  a  matter  of  detail  to  figure  the 
total  number  of  units,  apply  the  factor  and  arrive  at  the  esti- 
mated cost. 

For  illustration  let  us  assume  an  apartment  building  erected 
on  a  lot  50  feet  in  width  by  100  feet  in  depth.  Let  us  assume 
the  law  provides  only  70  per  cent  of  an  inside  lot  may  be  built 
upon  so  that  even  if  not  regular  the  ground  covered  will  be 
equal  to  50  X  70  or  3,500  square  feet.  If  the  building  is  four 
stories  and  cellar  it  will  be  about  50  feet  in  height  so  that  the 


170    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

cubic  contents  will  be  50  X  70  X  50  =  175,000  cubic  feet. 
If  the  factor  of  unit  cost  for  such  a  building  is  30  cents,  we  will 
obtain  the  correct  result:  175,000  X  30  =  $52,500 — cost  of 
building. 

In  making  our  computation  on  the  basis  of  square  feet  of 
floor  surface,  the  figures  will  be:  50  X  70  =  3,500  square  feet 
on  one  floor;  3,500  X  5  —  17,500  square  feet  on  4  floors  and 
cellar.  The  cost  of  this  building  will  be  approximately  $3.00 
per  square  foot,  so  that — 17,500  X  $3.00  =  $52,500— cost 
of  building. 

As  an  estimate,  either  of  the  two  methods  would  give  fairly 
accurate  results  assuming  of  course  that  we  had  classified  our 
building  correctly  as  being  of  a  grade  costing  30  cents  per  cubic 
foot  or  $3.00  per  square  foot  of  floor  surface. 

The  following  tables  are  statements  of  unit  costs  of  some 
standard  buildings,  comparing  pre-war  costs  with  those  of  the 
summer  of  1921 : 


Cost  per  unit  of  cubic  feet 

Pre-war  1921 

Frame   dwellings    $.14—$     .18  $.28— $.45 

Brick    dwellings    15—       .19  .26 —  .50 

Cold   water   flats — brick    12—       .15  .30—  .35 

Steam  heated  non-fireproof  apartments.       .19 —       .22  .35 —  .42 

Fireproof    elevator    apartments 30 —       .35  .60 —  .75 

Non-fireproof   loft  buildings 10 —       .15  .25 —  .30 

Fireproof  loft  buildings 25 —       .30  ,3-1 —  .40 

Hotels     35—      .50  .65—1.00 

Office    buildings     45—     1.00  .75—2.00 

Cost  per  square  foot  of  floor  space 

Pre-war  1921 

Frame   dwellings    $2.00— $10.00 

Brick    dwellings    2.50 —  10.00  £ 

Cold  water   flats— brick    1.25—     1.75 

Steam  heated  non-fireproof  apartments.      1.50 —     2.00 

Fireproof  elevator  apartments 3.00 —     6.00 

Non-fireproof   loft  buildings   1.00 —     1.75 

Fireproof    loft    buildings    2.00 —     3.75 

Hotels     3.00—     7.00 

Office    buildings     3.00—     7.00 

Values  computed  from  rentals. — It  is  generally  recognized 

that  if  property  is  suitably  improved  its  rental  is  a  safe  guide 

to  value.     This  assumes  the  building  to  be  fully  rented   at 

normal  rents.     The  net  rental  is  of  course  the  amount  of  net 
income  received  by  the  owner  and  this  sum  capitalized  at  an 


THE  VALUATION  OF  REAL  ESTATE        171 

appropriate  percentage  gives  the  value.  Different  rates  may 
be  used  when  land  and  building  values  are  separated  and  of 
course  due  allowance  should  be  made  for  the  depreciation  of 
the  building. 

A  shorter  method  than  the  foregoing  is  that  of  estimating 
the  value  from  the  amount  of  the  gross  rents.  The  following 
table  gives  percentages  of  gross  rents  to  values  of  some  stan- 
dard building  types: 

Dwellings     12% 

Cold   water   flats    12%  to  15% 

Steam   heated    flats    15%  to  20% 

Elevator    apartments    18%  to  25% 

Loft   buildings    15%  to  20% 

Office    buildings     20%  to  25% 

The  amount  of  service  given  to  the  tenants  must  be  con- 
sidered in  determining  which  rate  to  use  for  any  particular 
building.  It  should  also  be  noted  whether  the  rents  are  likely 
to  be  maintained,  or  have  been  increased  as  the  result  of  a 
temporary  condition.  It  may  be  safer,  in  attempting  to  value 
some  buildings  on  the  basis  of  gross  rental,  to  take,  not  the 
rents  actually  being  received,  but  those  which  are  recognized  as 
the  fair  rents  for  similar  space.  Apartment  buildings  in  a 
given  locality  may  be  worth  on  the  average  a  rent  of  twenty 
dollars  per  room  per  month.  If  one  particular  house  happens 
to  be  rented  at  thirty  dollars  per  room  it  is  likely  that  the 
owner  has  taken  advantage  of  a  temporary  shortage  of  housing 
space  to  obtain  an  unusually  large  rent.  Instances  have  been 
found  in  which  a  building  has  been  filled  up  by  giving  special 
inducements  to  tenants  to  rent  space  in  it.  The  necessity  of 
care  in  capitalizing  gross  rents  to  get  a  value  is  apparent. 

Sometimes  a  rough  estimate  of  value  is  made  by  traders  by 
multiplying  the  gross  rent  by  a  certain  number.  Thus  the  value 
of  an  ordinary  apartment  is  approximated  at  five,  five  and  one- 
half,  or  six  times  the  rent. 

The  work  of  the  appraiser  in  condemnation  proceedings. — 
Private  property  may  be  taken  for  public  uses  under  the  State's 
right  of  eminent  domain.  This  right  may  be  exercised  by  the 
United  States  Government,  by  the  States  and  counties,  and  also 
by  cities  and  villages  upon  which  the  right  has  been  conferred. 
The  right  of  eminent  domain  is  also  conferred  upon  public 
service  corporations,  such  as  railroads,  and  telegraph  com- 
panies, whenever  a  public  purpose  is  to  be  served  by  their 


172    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

acquiring  the  land.  Our  constitution  places  a  safeguard  upon 
the  rights  of  private  property  in  that  it  guarantees  that  no 
property  shall  be  taken  except  by  due  process  of  law  and  pay- 
ment of  just  compensation.  Due  process  of  law  includes  notice 
to  the  owner  and  a  just  trial. 

The  proceeding  by  which  property  is  taken  for  public  uses 
is  called  a  condemnation  proceeding.  In  the  case  of  public 
service  corporations  this  proceeding  may  include  proof  by  the 
corporation  of  the  necessity  for  taking  the  land,  but  this  usually 
does  not  have  to  be  done  when  the  land  is  taken  by  a  direct 
governmental  agency.  In  almost  every  case,  the  real  issue  to 
be  tried  is  the  amount  of  compensation  to  be  paid  the  owner  for 
the  property  taken.  Trial  is  usually  held  before  a  court  or 
before  a  commission  appointed  by  a  court.  The  proceeding 
also  includes  the  assessments  of  the  cost  upon  the  property 
benefitted. 

The  work  of  the  expert  appraiser  in  condemnation  proceed- 
ings consists  in  giving  testimony  before  the  court  or  commission 
of  the  value  of  the  property  condemned.  Experts  are  usually 
retained  by  the  owner  and  other  experts  by  the  corporation  or 
public  authorities  interested.  The  owner  wants  to  get  as  much 
as  possible  for  his  property,  and  the  other  side  wants  to  pay 
as  little  as  may  be  necessary.  The  experts  are  placed  on  the 
stand  and  examined  as  to  their  qualifications  to  act  as  experts 
and  to  place  upon  the  record  their  opinions  regarding  the  valua- 
tion of  the  property  under  condemnation.  The  examination 
will  bring  out  the  familiarity  of  the  witness  with  the  neighbor- 
hood and  his  personal  knowledge  of  sales  of  similar  property 
actually  made.  He  may  have  to  make  use  of  the  Davies  or 
Hoffman  rules,  the  cost  of  buildings,  the  rental  value  of  the 
property,  and  the  adequacy  of  the  improvement.  He  may  also 
have  to  testify  as  to  special  features  pertaining  to  the  property, 
tending  to  increase  or  reduce  its  value.  Witnesses  are  cross- 
examined  by  the  opposite  side,  and  efforts  are  made  to  mini- 
mize the  value  of  their  testimony  or  to  detract  from  its  weight. 
The  proceeding  may  become  a  battle  of  experts.  The  expert  on 
the  stand  requires  not  only  the  knowledge  and  experience  to 
give  weight  to  his  testimony  but  also  the  ability  to  conduct 
himself  properly  under  examination  and  cross-examination.  He 
is  testifying  as  an  expert  to  a  valuation  computed  on  the  basis 
of  a  definite  theory.  He  should  adhere  to  this  theory  in  order 
to  be  consistent  and  not  become  confused.  For  figures,  he 


THE  VALUATION  OF  REAL  ESTATE       173 

should  refer  to  notes.  He  should  be  patient  and  courteous  yet 
at  the  same  time  have  his  wits  sharp  to  parry  questions  designed 
to  trap  him. 

It  may  be  noted  that  on  direct  examination  the  witness,  in 
most  States,  cannot  testify  regarding  other  sales  in  order  to  sup- 
port his  opinion  of  value.  Cross-examination  by  opposing  coun- 
sel may  seek  to  bring  in  testimony  of  sales  which  apparently  tend 
to  show  a  less  value  than  that  stated  by  the  witness,  but  re-direct 
examination  will  endeavor  to  have  the  witness  show  special 
features  of  such  sales  and  will  ask  him  questions  regarding  other 
sales  which  help  the  case. 

If  the  testimony  is  taken  before  a  commission,  an  award  is 
made  to  the  owner  and  embodied  in  a  report  to  the  court.  The 
opportunity  is  given  to  both  sides  to  state  objections.  The 
court  may  confirm  the  award  or  if  it  sees  fit  may  send  it  back 
to  the  commission  for  a  re-hearing  or  may  appoint  a  new  com- 
mission to  hear  the  testimony. 

Consequential  damages. — When  a  part  of  a  parcel  of  land 
under  one  ownership  is  taken  by  condemnation,  the  value  of 
the  damages  to  be  proved  is  often  not  the  value  by  itself  of 
the  part  taken  but  the  difference  between  the  value  of  the 
property  as  a  whole  before  the  proceeding  and  the  value  of  the 
remainder  after  the  condemnation  proceeding  has  taken  a  part 
of  it.  This  amount  over  and  above  the  value  of  the  part 
actually  taken  is  known  as  consequential  damages.  That  is  to 
say,  the  value  of  the  remainder  has  been  reduced  as  a  direct 
result  of  the  proceeding.  Should  the  proceeding  be  for  a 
public  improvement,  such  as  a  park,  which  would  tend  to  in- 
crease all  values  in  the  neighborhood,  such  increment  cannot  be 
used  as  an  offset  to  the  amount  of  damages  sustained  by  the 
owner  by  reason  of  the  condemnation  of  his  land. 


CHAPTER  XV 

MORTGAGE  LOANS 

The  demand  for  mortgage  loans. — Owners  of  real  property 
are  large  borrowers  of  money,  giving  their  land,  both  improved 
and  unimproved,  as  security  for  the  amounts  loaned  to  them. 
The  instrument  by  which  the  property  is  pledged  is  known  as 
a  mortgage,  a  discussion  of  which  appears  in  chapter  VIII. 
A  classification  of  some  of  the  principal  borrowers  and  the 
reasons  why  they  borrow  on  their  properties,  follows : 

Farmers. — Farmers  borrow  on  mortgage  to  purchase 
their  farms,  to  erect  buildings,  to  purchase  tools,  machinery, 
seed  and  fertilizer,  to  hire  labor  and  to  pay  off  existing  in- 
debtedness. 

Builders — Those  who  erect  buildings,  either  for  their  own 
use  or  to  sell  to  others,  frequently  borrow  a  large  part  of 
the  cost  on  a  mortgage.  If  the  mortgage  is  advanced  dur- 
ing construction  it  is  known  as  a  building  loan  mortgage. 
Many  building  loan  mortgages  become  permanent  mortgages 
on  completion  of  the  building. 

Operators  and  investors. — Those  who  buy  and  sell  real 
estate  as  operators  or  speculators,  and  those  who  purchase 
it  for  investment,  find  it  desirable  to  invest  their  own  funds 
in  the  property  only  to  the  extent  of  a  part  of  the  gross 
purchase  price.  The  remainder  is  represented  by  a  mortgage 
or  mortgages,  their  investment  is  a  margin  or  equity  in  the 
property. 

Developers  of  vacant  tracts. — When  a  tract  of  land  is 
converted  into  building  lots,  that  is,  developed,  or  sub- 
divided, a  large  amount  of  capital  may  be  required  to 
finance  the  purchase  and  the  cost  of  the  improvements  in- 
cident to  the  development — grading,  filling,  laying  out 
streets,  putting  in  water  pipes,  etc.  Those  who  undertake 
the  enterprise  often  raise  part  of  the  capital  required  by 
means  of  a  mortgage  loan  on  the  property. 

Home  builders  and  buyers. — That  valuable  and  worthy 

174 


MORTGAGE  LOANS  175 

citizen  who  seeks  to  own  his  own  home  is  a  constant  bor- 
rower on  mortgage.  He  puts  his  savings,  it  may  be  the 
first  fruits  of  his  thrift,  towards  the  purchase  price  and  bor- 
rows the  rest.  It  may  be  that  his  contribution  is  only  a 
small  part  of  the  price  and  there  are  often  both  first  and 
second  mortgages  on  his  house,  but  he  puts  himself  into  it, 
he  and  his  family  get  in  back  of  it,  and  the  mortgages  on 
such  property,  be  they  first  or  second  in  lien,  are  usually  good 
security  for  the  money  borrowed. 

Corporation  enterprises. — Many  large  real  estate  pro- 
jects are  undertaken  on  borrowed  money.  They  include 
some  of  the  great  hotels,  office  buildings,  factories,  loft 
buildings,  warehouses,  railroad  terminals  and  stations.  The 
borrowings  may  be  represented  by  a  mortgage  to  a  single 
lender  or  by  a  bond  issue  secured  by  a  trust  mortgage. 
Why  it  pays  the  owner  to  borrow  part  of  the  cost. — From 
an  analysis  of  the  various  kinds  of  borrowers,  the  reasons  for 
borrowing  on  a  real  estate  mortgage  are  apparent.  These 
reasons  may  be  amplified.  There  are  those  who  own  property 
outright,  free  and  clear  of  mortgage.  They  may  mortgage 
the  property  to  raise  money  for  the  purpose  of  paying  debts, 
or  for  investment  in  other  enterprises,  or  the  purchase  of  other 
securities.  They  may  also  require  it  for  developing  or  im- 
proving the  property  itself.  Others  never  own  the  property 
free  and  clear,  they  place  a  mortgage  on  it  at  the  time  of  pur- 
chase to  pay  part  of  the  purchase  price.  Some  of  this  borrow- 
ing may  be  a  matter  of  necessity  but  much  of  it  is  because  of 
the  fact  that  it  is  an  advantage  to  the  owner;  it  pays  him  to  have 
a  mortgage  on  his  property.  As  an  illustration  assume  that  a 
piece  of  property  costing  $100,000  brings  in  a  gross  rental  of 
$15,000  per  annum  and  that  it  is  free  and  clear.  If  the  taxes, 
repairs  and  other  expenses  and  provision  for  depreciation 
amount  to  $8,000  annually  the  net  income  is  $7,000  or  1% 
on  the  owner's  investment.  Now  suppose  the  owner  mort- 
gages the  property  for  $60,000  at  $*/>  per  annum.  The  in- 
terest amounting  to  $3,300  would  reduce  the  net  income  to 
$3,700  per  annum,  but  as  the  owner's  investment  is  now  only 
$40,000  his  rate  of  return  is  9  y±  %  per  annum.  It  can  be  taken 
as  a  rule  that  when  mortgage  money  can  be  borrowed  at  a 
rate  less  than  the  rate  of  net  return  on  the  property  unmort- 
gaged, borrowing  raises  the  rate  of  return  on  the  owner's  in- 
vestment. 


176    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

When  property  is  unimproved,  or  inadequately  improved, 
borrowing  to  erect  a  suitable  improvement  is  invariably  an  ad- 
vantage. An  annual  loss  or  a  very  small  annual  return  may  be 
turned  into  an  annual  income  commensurate  with  the  value  of 
the  property.  The  land  may  be  valuable  but  it  will  only  yield 
its  economic  rent  when  improved  with  a  building,  and  it  is 
often  a  financial  advantage  to  obtain  a  mortgage  loan  to  pay 
all  or  part  of  the  cost  of  such  building.  Suppose  a  piece  of  un- 
improved land  to  be  worth  $100,000.  The  taxes  can  be 
figured  at  $2,000,  and  the  loss  of  interest  on  the  money  in- 
vested on  the  land  at  5%,  $5,000,  a  total  annual  loss  of  $7,000 
to  the  owner.  To  save  this  loss  the  owner  puts  up  a  building 
costing  $200,000  and  he  borrows  all  of  this  amount  on  a  mort- 
gage at  6%.  The  land  and  building  together  produce  a  rent 
income  of  $35,000,  the  taxes,  repairs,  depreciation  and  other 
charges  are  $18,000,  leaving  a  net  rental  of  $17,000.  Out 
of  this,  $12,000  is  paid  as  interest  on  the  money  borrowed 
leaving  $5,000  for  the  owner,  being  5%  on  his  investment 
which  is  still  $100,000.  He  has  therefore  stopped  his  loss,  and 
now  gets  an  income  of  $5,000.  It  is  probable  that  in  a  case  of 
this  kind  the  amount  of  depreciation  of  the  building  would  be 
represented  by  a  corresponding  annual  payment  to  reduce  the 
amount  of  the  mortgage.  No  careful  mortgagee  would  allow 
the  building  to  depreciate,  and  permit  the  mortgage  to  remain 
for  its  full  amount.  It  is  possible  that  the  annual  payments 
on  the  mortgage  would  be  much  more  than  the  depreciation, 
and  if  so  it  would  mean  that  the  owner  was  constantly  increas- 
ing his  equity  by  a  further  investment. 

The  two  foregoing  illustrations  serve  to  show  why  income 
property  may  sometimes  be  mortgaged  to  advantage.  The 
principle  applies  to  all  property  dealt  in  for  income  or  profit. 
The  advantages  of  borrowing  to  buy  a  home  are  more  than 
monetary.  Mortgage  loans  enable  families  to  secure  homes  on 
small  cash  payments.  Additional  savings  may  thereafter  be 
applied  to  reduce  or  pay  off  the  mortgages.  . 

Lenders  of  mortgage  money. — There  are  many  financial 
institutions  in  the  United  States  which  make  mortgage  loans 
for  the  purpose  of  investing  their  own  funds.  These  include 
the  life  insurance  companies,  many  of  which  are  great  institu- 
tions with  resources  of  hundreds  of  millions  of  dollars;  savings 
banks,  which  are  the  principal  depositories  for  the  savings  of 
the  people  in  some  sections  of  the  country;  building  and  loan 


MORTGAGE  LOANS  177 

associations,  which  are  organized  for  the  purpose  of  encour- 
aging thrift  and  home  building;  trust  companies,  both  for  their 
own  funds  and  for  trust  funds  in  their  charge;  land  banks  and 
farm  loan  associations,  both  Federal  and  State,  and,  besides 
these,  a  great  many  charitable,  educational,  and  other  institu- 
tions. There  are  other  corporations,  many  of  them  large, 
which  make  mortgage  loans  as  a  business,  and  which  sell  the 
mortgages  to  investors  with  or  without  a  guarantee  of  payment, 
and  either  in  whole  or  subdivided  into  bonds  or  certificates. 
Then,  of  course,  the  private  investor  lends  his  funds  on  real 
estate  mortgages,  dealing  either  directly  with  the  borrower 
or  through  a  broker  or  a  mortgage  company. 

Mortgage  loans  compared  with  other  investments. — The 
entire  subject  of  the  investment  of  funds  covers  a  wide  range 
and  involves  a  consideration  of  many  questions.  The  real 
estate  mortgage  as  an  investment  has  certain  advantages  and 
disadvantages  as  seen  by  comparison  with  other  forms  of  in- 
vestment. The  principal  features  to  be  considered  are  safety, 
income  yield,  and  marketability. 

It  may  be  emphasized  that  from  the  point  of  safety  the  mort- 
gage loan  is  superior  to  many  other  investments.  It  is  a  direct 
lien  on  the  land  and  the  improvements  on  the  land,  and  if  it  is 
made  for  a  proper  proportion  of  the  value  of  the  property  the 
investment  is  well  secured  and  repayment  practically  certain. 
It  is  important,  however,  for  the  investor  to  be  assured  that 
his  lien  is  a  legal  and  enforceable  one  and  also  that  there  is 
sufficient  value  on  the  property  to  make  it  safe.  To  have  such 
assurance  the  investor  does  well  to  make  his  mortgage  invest- 
ments through  persons  or  corporations  of  unquestioned  ability 
and  financial  standing,  unless,  of  course,  he  has  the  necessary 
real  estate  knowledge  and  experience  to  act  for  himself.  Safety 
is,  of  course,  increased  if  payment  of  the  mortgage  be  guar- 
anteed by  a  reliable  company. 

The  income  yield  on  real  estate  mortgages  is  usually  higher 
than  the  return  on  other  prime  investments.  When  high  class 
bonds  pay  the  investor  from  3l/2%  to  $%  per  annum,  real 
estate  mortgages  pay  from  ^l/2%  to  6%  per  annum.  Many 
choice  bonds  have  sold  on  a  higher  basis  during  recent  years  due 
to  peculiar  conditions,  and  the  rate  on  real  estate  mortgages 
has  been  kept  down  by  law  to  6%  in  many  States.  The  result 
has  been  a  better  relative  showing  for  the  bond,  but  under 
normal  conditions  the  mortgage  has  the  advantage. 


178    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

From  the  point  of  view  of  marketability,  the  mortgage  often 
must  give  way  to  other  investments.  A  real  estate  mortgage  is 
usually  made  for  a  definite  term  and  until  maturity  may  not 
be  saleable  except  at  a  loss.  At  maturity  it  may  be  called  but 
collection  is  sometimes  slow.  The  owner  of  the  property  often 
must  raise  the  money  by  securing  the  mortgage  elsewhere.  If 
the  mortgage  has  to  be  enforced  by  foreclosure,  a  certain 
amount  of  delay  is  inevitable.  Many  stocks  and  bonds  are 
quickly  marketable,  and  may  be  sold  on  a  few  hours'  notice, 
thus  returning  the  investor's  money  more  quickly  than  a  mort- 
gage could  be  collected  or  sold.  It  must  be  noted  however  that 
stocks  and  bonds  fluctuate  from  day  to  day  and  a  sale  may  re- 
sult in  considerable  loss.  A  mortgage,  on  the  other  hand,  has 
often  but  a  short  time  to  run  and  can  usually  be  collected  in 
full  at  maturity,  and  if  it  is  sold  before  maturity  the  loss  or 
expense  in  selling  is  almost  always  a  small  one.  There  have 
been  developments  in  mortgage  lending  in  recent  years  which 
have  a  tendency  to  make  mortgage  loans  more  marketable. 

Against  a  certain  disadvantage  of  lack  of  marketability  of 
mortgages  may  be  put  the  advantages  of  larger  income  yield, 
a  great  degree  of  safety  and,  usually,  an  early  maturity  date. 
The  objection  that  technical  skill  is  needed  to  make  mortgage 
investments  may  be  answered  by  saying  that  those  who  lack 
such  skill  may  deal  with  reliable  concerns  handling  mortgage 
investments  as  a  business. 

The  Federal  and  State  income  tax  laws  have  worked  a  de- 
cided disadvantage  to  mortgage  investments  and  one  that  can- 
not be  overlooked.  The  income  from  State  and  municipal  bonds 
is  exempt  from  taxation,  and  so  is  that  from  United  States 
Government  bonds  to  a  large  extent.  As  mortgage  interest  is 
taxable,  the  net  return  after  payment  of  income  taxes  is  often 
less  to  the  private  investor  than  the  return  on  good  tax-exempt 
securities.  The  larger  the  investor's  income  the  more  pro- 
nounced this  feature  becomes.  It  has  resulted  in  taking  a  large 
amount  of  private  funds  out  of  the  mortgage  market. 

.Safety  in  mortgage  lending. — As  has  already  been  noted 
a  mortgage  is  a  direct  lien  on  the  property  covered.  If  the 
loan  is  not  paid  the  property  may  be  sold  and  the  proceeds  ap- 
plied to  pay  it.  From  the  point  of  view  of  safety  the  mortgage 
should  be  a  first  lien,  that  is,  it  should  be  prior  to  all  other 
claims  against  the  property.  It  is  true  that  there  are  mortgages 


MORTGAGE  LOANS  179 

which  are  not  first  liens ;  they  may  be  second  mortgages  or  third 
mortgages  for  example.  Usually  no  mortgage  but  a  first  mort- 
gage can  be  considered  a  safe  investment.  As  an  illustration 
assume  a  parcel  of  improved  city  realty  appraised  at  $25,000. 
The  owner  secures  a  first  mortgage  of  $15,000.  The  property 
can  depreciate  in  value  about  40%  before  there  is  danger  of 
loss  to  the  holder  of  the  mortgage.  Suppose  the  owner  places 
on  the  property  a  second  mortgage  of  $5,000.  If  the  property 
depreciates  only  20%  the  equity  has  disappeared,  and  the 
holder  of  the  second  mortgage  is  in  danger  of  loss.  This  risk  is 
increased  if  the  owner  neglects  to  pay  taxes  and  assessments  and 
interest  on  the  two  mortgages.  In  the  event  of  foreclosure 
the  sum  of  the  liens  may  exceed  the  value  of  the  property,  and 
unless  recovery  can  be  had  on  the  bond,  the  second  mortgagee 
may  lose  part  of  his  investment. 

In  the  placing  of  funds  in  a  first  mortgage,  the  investor  should 
satisfy  himself  that  the  mortgage  is  a  valid  lien,  that  is  that 
it  is  made  and  executed  by  the  owner  or  owners  of  the  fee 
simple,  that  they  have  a  legal  right  to  mortgage  the  property, 
that  dower  and  all  other  rights  have  been  released  or  sub- 
ordinated, and  that  it  is  superior  to  all  other  liens  on  the  prop- 
erty. It  is  usually  necessary  to  see  that  there  are  no  encroach- 
ments or  other  defects  affecting  the  marketability  of  the  title, 
and  no  restrictions  which  have  been  violated  or  which  ad- 
versely affect  its  value.  These  things  can  only  be  determined 
by  an  examination  of  title  by  a  competent  attorney  or  by  a 
title  company,  or  by  a  certificate  of  registration  under  the  Tor- 
rens  Law.  An  accurate  survey  should  always  be  obtained  in 
connection  with  the  examination  of  title. 

Prior  even  to  the  examination  of  the  title,  reliable  informa- 
tion should  be  obtained  as  to  the  value  of  the  property.  The 
lender  himself  may  have  personal  knowledge  of  the  value  of 
the  property  offered  as  security  for  the  loan.  In  the  absence 
of  such  knowledge  he  should  obtain  a  reliable  appraisal. 

The  question  naturally  arises,  what  percentage  of  the  ap- 
praised valuation  of  a  piece  of  property  can,  with  safety,  be 
loaned  on  a  mortgage?  In  answering  this  it  must  be  stated 
that  no  rule  can  be  made  which  applies  to  every  case.  Under 
the  law  in  New  York,  savings  banks  are  permitted  to  loan 
60%  on  improved  property  and  40%  on  unimproved  and  un- 
productive property,  and  many  other  lenders  follow  the  same 
rule.  In  practice,  however,  many  lenders  find  that  safety  re- 


180    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

quires  that  in  many  cases  the  loan  should  be  for  a  much  smaller 
percentage  of  value  than  those  quoted.  Consideration  should 
be  given  to  the  question  of  stability  of  value  and  the  market- 
ability of  the  security.  If  there  should  be  a  default  on  the 
mortgage;  the  property  should  be  of  such  a  character  as  to 
find  a  ready  market.  Property  not  easily  saleable  is  not  usually 
the  best  security  for  a  loan. 

Dwellings,  apartment  houses,  stores  and  office  buildings  are 
classed  as  properties  of  standard  values  and,  based  on  a  fair 
appraisal,  loans  on  them  should  be  secure.  Factories  and  gar- 
ages are  not  always  saleable  or  rentable  and  it  is  not  usually 
wise  to  make  too  full  a  loan  on  them ;  the  percentage  of  value 
loaned  should  be  less.  Theatres  and  churches  are  special 
buildings;  some  investors  will  not  loan  upon  them  at  all  and 
others  loan  only  a  small  percentage  of  their  value.  In  the 
case  of  special  buildings,  and  in  fact  with  all  property,  the  safety 
of  the  loan  is  increased  if  the  land  value  is  a  large  proportion 
of  the  total  value.  Some  lenders  favor  loans  where  the  land 
value  alone  equals  or  exceeds  the  amount  of  the  loan. 

Mortgage  loans  are  sometimes  made  on  unimproved  and 
unproductive  land.  There  is  danger  in  this,  as  such  land  pro- 
duces no  income  and  is  frequently  difficult  to  sell.  Of  course 
a  choice  plot  in  a  large  city  may  be  an  exception  to  this  rule 
but  it  certainly  applies  to  land  in  suburban  sections.  Farm 
land  of  good  quality  is  not  usually  unproductive  land,  but  the 
loan  should  be  based  on  its  value  as  farm  land  and  not  as  po- 
tential building  lots. 

The  cost  of  a  building  is  not  always  a  measure  of  its  value. 
A  large  sum  may  be  spent  by  an  owner  in  erecting  a  mansion 
to  suit  his  own  tastes  and  inclinations,  but  commercially  the 
building  would  not  be  worth  its  cost.  A  valuation  of  such  prop- 
erty for  loan  purposes  should  be  on  the  basis  of  what  it  would 
reasonably  sell  for.  A  New  York  lending  institution  recently  re- 
jected an  application  for  a  loan  of  $75,000  on  a  mansion  costing 
$750,000  on  the  ground  that,  while  it  might  be  a  beautiful 
monument  its  commercial  value  was  small. 

Conditions  caused  by  the  world  war  have  resulted  in  building 
costs  being  increased  greatly.  Both  materials  and  labor  have 
been  high  in  price  and  often  difficult  to  obtain.  Lenders  used 
to  making  loans  on  pre-war  costs  have  felt  that  these  prices 
would  ultimately  return  to  normal  and  they  have  not  thought 
it  wise  to  make  loans  based  on  prices  temporarily  prevailing. 


MORTGAGE  LOANS  181 

First  mortgage  loans  on  new  buildings  have  been  be- 
tween 40%  and  50%  of  cost  (land  and  building)  rather  than 
the  customary  60%. 

Amortization. — Some  mortgage  loans  are  made  for  short 
terms  such  as  one  year  or  three  years.  These  loans  at  maturity 
may  be  paid  off  or  renewed  or  allowed  to  run  as  open  or  past 
due  mortgages.  It  is  a  matter  determined  by  the  wishes  of  the 
lender  and  borrower.  Some  other  loans  are  made  for  periods 
of  five  years  or  ten  years.  The  danger  of  making  a  mortgage 
loan  on  improved  property  for  a  long  term  is  that  during  the 
term  the  value  of  the  security  may  depreciate.  If  the  depre- 
ciation were  only  slight,  it  would  probably  make  no  difference 
to  the  lender,  but  it  is  conceivable  that  during  a  period  of  ten 
years,  the  value  of  a  piece  of  property  may  shrink  materially. 
The  decrease  in  value  may  come  about  through  physical  de- 
preciation or  obsolescence  or  through  changing  local  condi- 
tions. There  may  be  depletion  of  the  soil  in  the  case  of  farm 
lands,  physical  depreciation  of  buildings  due  to  lack  of  care  and 
failure  to  make  necessary  repairs,  and  evolution  in  the  types 
and  styles  of  buildings  make  some  of  the  old  buildings  obso- 
lete. Changes  in  trade  centers  which  result  in  business  leaving 
a  section  often  cause  values  on  the  old  centres  to  decline. 
Examples  of  this  may  be  seen  in  the  movements  of  the  great 
retail  stores  in  New  York  City.  When  the  shopping  district 
moved  elsewhere  the  old  locality  showed  decreasing  values. 
Business  depressions  and  any  condition  which  causes  rents  to 
be  reduced  naturally  have  an  adverse  effect  on  some  realty 
values. 

There  are  two  ways  in  which  the  principal  of  a  mortgage 
investment  may  be  safeguarded  from  the  effect  of  declining 
values.  In  the  first  place,  a  mortgage  may  be  made  for  a  short 
term,  the  property  may  be  reinspected  and  re-appraised  at 
each  maturity  and  at  short  intervals  thereafter,  and  reductions 
in  the  amount  of  the  loan  may  be  required  whenever  any 
reduction  is  deemed  desirable.  On  the  other  hand,  the  mort- 
gage may  be  made  for  a  longer  period  with  a  provision  that 
it  be  amortized,  that  is  to  say,  that  regular  periodic  pay- 
ments be  made  on  account  of  the  principal  during  the  term 
of  the  mortgage.  Some  of  the  largest  lending  institutions  in 
the  country  are  making  long  term  mortgages  with  a  provision 
for  amortization  of  from  2%  to  10%  of  the  principal  of  the 
loan  annually.  Loans  made  under  the  provisions  of  the  Fed- 


182    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

eral  Farm  Loan  Act  are  all  amortized.  Building  loan  asso- 
ciations and  similar  corporations  require  that  their  mortgages 
be  paid  off  in  installments. 

The  advantages  of  amortized  loans  to  the  lender  are  that 
the  loan  is  constantly  being  reduced  and  made  more  safe  and 
the  danger  of  loss  due  to  depreciation  or  declining  value  of 
the  security  is  minimized.  In  the  case  of  large  lenders,  there 
is  a  constant  inflow  of  funds  for  reinvestment  in  other  loans. 
The  advantages  to  the  borrower  are  that  his  debt  is  being  paid, 
his  equity  in  the  property  is  increasing  and  his  interest  charges 
growing  less.  He  also  is  saved  the  trouble  and  expense  of 
renewing  or  replacing  at  short  intervals  and  he  does  not  have 
to  face  a  possible  requirement  for  a  large  reduction  of  the  loan 
at  one  time. 

There  are  some  disadvantages  to  be  noted  in  connection  with 
amortized  loans.  They  are  not  usually  desirable  to  a  private 
investor  owning  a  few  mortgages.  He  would  receive  on  such 
mortgages  small  and  frequent  payments  of  principal,  and  it 
is  often  difficult  to  reinvest  these  small  amounts.  For  such  a 
person,  a  straight  mortgage  for  a  term  of  not  too  great  length 
would  seem  more  desirable.  Many  borrowers,  too,  are  un- 
willing or  unable  to  amortize  their  first  mortgage  loans.  This 
is  especially  so  in  large  cities  where  there  is  some  degree  of 
real  estate  activity.  Investors  in  real  property  may  not  wish 
to  have  their  incomes  reduced  by  compulsory  payments  on 
mortgages.  Builders  and  operators  sell  much  property  on  small 
cash  payments,  taking  a  purchase  money  second  mortgage  in 
part  payment.  If,  as  is  usually  the  case,  the  second  mortgage 
is  payable  in  installments,  the  owner  may  be  unable  to  pay, 
in  addition  to  the  second  mortgage  installments,  amounts  in 
reduction  of  the  first  mortgage.  It  may  be  seen  that  no  rule 
for  amortization  can  be  made  governing  every  case.  In  some 
cases  it  is  desirable,  in  others  unwise  or  unnecessary.  In  some 
localities,  the  tendency  of  realty  values  is  to  increase,  and  if  the 
loan  is  safe  when  made  and  the  security  increasing  in  value, 
amortization  is  hardly  necessary. 

Advantages  of  a  good  bond. — Elsewhere  in  this  book  ex- 
planation is  made  of  the  bond  or  note  which  accompanies  the 
mortgage.  The  bond  or  note  is  the  personal  obligation  of  the 
borrower  to  repay  the  sum  borrowed.  The  mortgage  on  the 
real  estate  is  given  as  security  for  the  borrower's  obligation. 
It  is  always  desirable  to  get  a  good  bond  or  note — that  is  to 


MORTGAGE  LOANS  183 

say,  one  made  by  a  person  or  corporation  financially  able  to 
pay  the  debt  when  required  to  do  so.  Of  course  many  mort- 
gage loans  are  made  entirely  on  the  value  of  the  real  estate, 
without  any  reference  to  the  financial  standing  of  the  bonds- 
man, but  the  loan  is  made  additionally  secure  when  the  bond 
is  of  high  character.  Lenders  like  to  feel  that  those  in  back 
of  the  loan  are  responsible  and  able  to  pay  if  required  to  do  so. 
A  loan  on  a  factory  for  example  made  to  an  irresponsible 
owner,  might  be  hazardous,  but  would  probably  be  secure 
if  made  to  a  large,  active  and  financially  strong  concern.  In 
the  renewal  of  a  mortgage  with  a  subsequent  owner,  consid- 
eration should  be  given  to  the  effect  such  a  renewal  would  have 
upon  the  original  bond.  If  it  is  desired  to  hold  the  original 
bondsman,  his  consent  to  the  renewal  should  be  obtained. 
Without  such  consent  the  lender  must  proceed  in  reliance 
upon  the  property  primarily  and  such  personal  obligation  as 
the  new  owner  can  give. 

Fire  insurance  a  necessity. — All  mortgages  upon  improved 
property  should  be  accompanied  by  fire  insurance  policies  hav- 
ing loss  payable  to  the  mortgagee.  The  insurance  should  be 
of  sufficient  amount  and  in  companies  of  good  standing. 
Loans  should  not  be  made  or  renewed  on  property  where  fire 
insurance  cannot  be  obtained,  unless  the  loan  is  based  on  land 
value  only. 

The  Federal  Farm  Loan  Act. — The  Federal  Farm  Loan 
Act  as  stated  in  its  title  is  "An  Act  to  provide  capital  for 
agricultural  development,  to  create  standard  forms  of  invest- 
ment based  upon  farm  mortgage,  to  equalize  rates  of  interest 
upon  farm  loans,  to  furnish  a  market  for  United  States  bonds, 
to  create  Government  depositaries  and  financial  agents  for  the 
United  States,  and  for  other  purposes."  Under  the  terms 
of  the  act  there  is  established  at  Washington  a  Federal  Farm 
Loan  Bureau  under  the  supervision  of  a  Federal  Farm  Loan 
Board  consisting  of  five  members  including  the  Secretary  of 
the  Treasury.  Continental  United  States,  excluding  Alaska, 
is  divided  into  twelve  districts  in  each  of  which  is  established 
a  Federal  Land  Bank  with  principal  office  located  in  such 
city  within  the  district  as  the  board  shall  designate.  The 
subscribed  capital  stock  of  each  land  bank  may  be  not  less  than 
$750,000.  The  Act  further  provides  that  corporations  known 
as  national  farm  loan  associations  may  be  organized  in  any 
community  where  ten  citizens  owning  land  desire  to  borrow 


184    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

an  aggregate  sum  of  $20,000.  New  members,  who  must  be 
applicants  for  loans,  may  be  admitted  to  memberships  in  an 
association.  Each  borrower  must  subscribe  to  stock  of  the 
association  to  the  amount  of  5%  of  his  loan,  and  no  more. 

Through  the  national  farm  loan  associations,  applications 
for  loans  to  its  members  are  made  to  the  Federal  Land  Bank 
of  the  district.  The  limitations  on  these  loans  as  stated  in  a 
circular  issued  by  the  Federal  Farm  Loan  Bureau  are  as  follows : 

1.  No  loan  may  be  made  except  upon  the  security  of  first 
mortgages. 

2.  The  amount  of  the  mortgage  can  not  exceed  one-half 
the  appraised  value  of  the  land  and  20  per  cent  of  the  per- 
manent improvements  thereon,  which  must  be  insured. 

3.  The  proceeds  of  the  loan  must  be  used  for  the  extin- 
guishment of  preexisting  indebtedness  or  for  productive  pur- 
poses, which  include  the  purchase  of  live  stock,  fertilizers, 
equipment,  and  improvements   (see  sec.  12,  subd.  4,  Farm 
Loan  Act). 

4.  Every  mortgage  must  contain  an  agreement  to  pay  off 
the  debt   (principal  and  interest)   in  fixed  annual  or  semi- 
annual installments. 

5.  The  amount  of  each  installment  may  be  fixed  by  the 
borrower,  but  can  not  be  less  than  sufficient  to  pay  off  the 
debt  in  40  years,  nor  greater  than  to  pay  it  off  in  5  years. 

6.  The  rate  of  interest  charged  any  borrower  can  not 
exceed  6  per  cent  per  annum. 

7.  The  borrower  can  not  be  called  upon  to  pay  the  debt 
except  by  the  installments  he  originally  fixes  unless  he  de- 
faults, but  after  five  years  he  may  pay  off  the  whole  or  any 
portion  at  his  option  at  any  installment  period.     Under  the 
amortization  plan  the  term  of  the  loan  and  the  amount  of 
each   installment   are   relative;   determining   one   fixes   the 
other. 

The  amount  of  loan  to  any  one  borrower  may  not  be  less 
than  $100  nor  more  than  $10,000.  The  funds  of  the  national 
farm  loan  association  are  invested  in  stock  of  the  Federal 
Land  Bank  and  the  Land  Bank  holds  the  stock  as  collateral 
security  for  the  loans  made  to  the  members  of  the  association. 
Loans  shall  not  exceed  twenty  times  the  amount  of  Federal 
Land  Bank  stock  subscribed  by  the  association.  The  Federal 
Farm  Loan  Board  appoints  a  farm  loan  registrar  in  each  land 
bank  district  to  receive  applications  for  the  issuance  of  farm 


MORTGAGE  LOANS  185 

loan  bonds.  When  an  application  for  the  issuance  of  such 
bonds  has  been  approved  by  the  Federal  Farm  Loan  Board, 
farm  loan  mortgages  of  not  less  than  the  amount  of  bonds  to 
be  issued  are  deposited  with  the  registrar  and  assigned  to  him 
in  trust.  The  bonds  authorized  are  delivered  to  the  land  bank 
and  may  be  sold  by  it. 

It  will  be  seen  that  as  the  stock  of  a  land  bank  owned  by  a 
loan  association  is  held  as  security  for  all  the  loans  made  to 
members  of  the  association,  and  as  the  association  endorses 
the  loans,  that  the  members  are  using  their  joint  credit  and  are 
liable  for  each  others  loans  to  the  extent  of  the  capital  con- 
tributed. 

To  illustrate  the  manner  in  which  the  system  works  we  may 
assume  that  a  number  of  citizens  of  a  district  form  a  farm 
national  loan  association  for  the  purpose  of  borrowing  a 
total  amount  of  $50,000  on  farm  mortgages.  They  subscribe 
$2,500  to  stock  in  the  association,  which  is  incorporated  and 
issues  its  stock  for  the  sums  contributed.  The  stock  is  re- 
tained by  the  association  as  collateral  security  for  the  loans 
to  be  made.  The  association  applies  to  the  district  Land 
Bank  for  the  loans  desired  by  its  members  and  which  aggre- 
gate $50,000. 

A  report  and  appraisal  of  a  committee  of  the  association 
accompanies  the  applications  for  the  loans.  If  passed  on 
favorably  by  the  Land  Bank,  the  loans  are  granted,  and  at 
the  same  time  the  association  subscribes  to  Land  Bank  stock 
to  the  amount  of  $2,500,  or  5%  of  the  amount  to  be  loaned. 
The  stock  is  retained  by  the  Land  Bank  as  collateral.  The 
Land  Bank  may  use  its  own  funds  to  make  the  loans,  and  it 
deposit  the  mortgages  with  the  registrar  and  obtain  farm 
loan  bonds.  The  farm  loan  bonds  are  sold  to  the  public  thus 
providing  funds  which  the  Land  Bank  can  use  for  making 
more  loans.  Through  the  medium  of  the  farm  loan  asso- 
ciations and  the  Land  Banks,  and  by  the  issuance  and  sale  of 
farm  loan  bonds,  funds  for  mortgage  loans  on  farms  flow  from 
investors  to  farmers. 

The  stock  of  a  Land  Bank  subscribed  in  connection  with  a 
mortgage  loan  is  paid  and  retired  when  the  loan  is  fully  paid 
as  is  also  a  corresponding  amount  of  the  farm  loan  association's 
stock.  Farm  loan  bonds  are  paid  at  maturity  by  tjie  Land 
Bank  which  issued  them.  If  a  Land  Bank  cannot  pay  its 
bonds  upon  liquidation  all  the  other  Land  Banks  are  liable  for 


186    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

a  proportionate  amount  of  the  deficit.  Farm  loan  bonds  are 
free  from  Federal,  State  and  local  taxation. 

The  act  also  provides  that  other  corporations  known  as 
Joint  Stock  Land  Banks  may  be  formed  having  powers  similar 
to  those  of  Federal  Land  Banks. 

Western  farm  mortgage  brokers. — A  number  of  reliable 
individuals  as  well  as  banks  and  trust  companies  are  in  the 
business  of  making  loans  on  western  farm  lands.  These 
brokers  and  banks  through  their  experts  and  attorneys  care^ 
fully  examine  and  appraise  the  farms,  and  search  the  titles. 
If  they  are  satisfied  as  to  the  security  offered  they  make  loans 
of  from  25%  to  50%  of  the  appraised  value.  The  rates  of 
interest  run  as  high  as  8%.  The  loans  are  then  sold  to  in- 
vestors throughout  the  country,  usually  at  a  rate  of  interest 
lower  than  that  paid  by  the  borrower.  The  brokers  or 
bankers  attend  to  all  details  such  as  collection  of  interest,  in- 
surance and  other  matters,  and  make  the  difference  on  the 
rate  of  interest  as  a  profit.  Some  of  the  mortgages  are  made 
in  trust  and  bonds  issued  against  them.  The  bonds  are 
sold  in  denominations  of  $100,  $500,  and  $1,000.  Many  life 
insurance  companies  are  investors  in  farm  loan  mortgages, 
and  many  American  farm  mortgages  were,  prior  to  the  world 
war,  sold  to  foreign  investors. 

The  Chicago  or  Straus  plan  of  real  estate  financing.— 
Several  large  firms  and  corporations  in  Chicago  have  special- 
ized in  the  financing  of  building  enterprises  and  the  sale  of 
mortgage  bonds  to  the  public.  One  of  these  firms  is  S.  W. 
Straus  &  Co.  who  advertise  extensively,  the  feature  of  their 
advertising  being  6%  interest  to  the  investor  and  many  years 
in  business  without  a  dollar  of  loss  to  an  investor.  The  Pru- 
dence Company,  Inc.,  a  New  York  corporation,  advertises 
Prudence  Bonds  which  are  issued  against  first  mortgages  in  a 
manner  similar  to  the  Straus  bonds.  Prudence  Bonds  are 
guaranteed  as  to  principal  and  interest  by  the  corporation. 
The  plan  upon  which  these  concerns  operate  may  be  briefly 
described. 

Applications  are  received  for  first  mortgages  upon  improved 
and  income  producing  real  estate.  The  property  may  be  office, 
hotel,  commercial  or  store  buildings  in  good  locations,  high- 
class  apartment  houses,  and  well  located  industrial  plants. 
Usual  appraisals  and  examinations  are  made.  In  many  cases 
careful  consideration  is  given  to  the  financial  condition  of  the 


MORTGAGE  LOANS  187 

borrower.  The  loans  are  made  for  a  term  of  years  with  a 
provision  for  periodic  payments  on  account  of  principal.  These 
payments  at  the  maturity  date  will  have  reduced  the  loan 
materially  or  paid  it  in  full. 

The  mortgages  may  be  held  by  the  lender  or  deposited  with 
a  trustee  and  bonds  or  certificates  issued  against  them  in  various 
denominations. 

The  bonds  or  certificates  bearing  interest  at  6%  are  then 
sold  to  the  public.  As  payments  are  made  on  the  principal 
of  the  mortgages,  bonds  are  paid  off.  The  profit  to  the  lend- 
ing institution  is  made  by  charges  of  a  fee  or  bonus  for  the 
loan,  or  from  another  point  of  view,  it  might  be  said  that 
the  loan  is  made  at  a  discount.  It  bears  interest  at  6%  on 
the  full  amount  and  as  the  bonds  are  sold  on  a  6%  basis,  the 
profit  comes  from  the  fee  or  discount  charged. 

The  success  of  the  concerns  mentioned  and  other  concerns 
in  the  same  business  is  due  to  the  care  with  which  their  loans 
are  made,  the  high  character  of  the  property  accepted  as 
security,  the  fact  that  such  property  is  income  producing  and 
that  the  loans  are  constantly  being  reduced  and  strengthened 
by  amortization.  It  would  also  seem  that  6%  real  estate 
first  mortgage  bonds  are  considered  attractive  by  a  large 
number  of  investors. 

Guaranteed  mortgages. — In  many  cities  there  are  a  number 
of  mortgage  companies  and  title  companies  which  conduct  a 
successful  business  in  guaranteed  mortgages.  The  outstanding 
guaranteed  mortgages  of  some  of  these  companies  run  into 
hundreds  of  millions  of  dollars. 

These  companies  accept  applications  from  borrowers  for  a 
great  variety  of  loans.  Some  companies  loan  on  improved 
property  only  while  others  loan  on  both  improved  and  unim- 
proved property.  The  percentage  loaned  on  improved  prop- 
erty is  usually  not  more  than  60%,  and  on  unimproved  property 
not  more  than  50%,  based  on  valuations  fixed  by  the  com- 
pany's appraisers.  A  large  proportion  of  the  loans  are  on 
buildings  fully  completed,  but  building  loans  are  also  made 
in  large  numbers.  In  fact,  the  title  companies  and  mortgage 
companies  have  been  important  factors  in  the  development  of 
many  cities  and  their  suburbs  by  financing  the  construction  of 
new  buildings,  especially  dwellings,  apartment  houses  and  stores. 

The  rate  of  interest  on  the  loans  is  the  prevailing  market 
rate  for  mortgages,  usually  not  less  than  5%,  nor  more  than 


1 8  8    REAL  ES  TA  TE  PRINCIPLES  AND  PR  AC  TICES 

6%.  A  fee  is  charged  the  borrower  to  cover  the  cost  of 
examination  of  title  and  preparation  and  recording  of  necessary 
papers.  In  the  case  of  building  loans  an  additional  fee  is 
charged  to  compensate  for  the  extra  work  involved. 

The  loans  made  by  these  companies  are  offered  for  sale  to 
investors  with  principal  and  interest  fully  guaranteed.  The 
rate  to  the  investor  is  usually  y2  of  1  %  less  than  the  rate 
called  for  by  the  mortgage,  this  y2  of  \%  being  the  premium 
charged  by  the  company  for  its  guarantee.  The  company 
pays  the  interest  when  due  whether  it  has  collected  it  or  not. 
It  also  attends  to  the  fire  insurance  and  sees  that  the  taxes, 
assessments  and  water  rates  on  the  property  are  paid  by  the 
borrower.  The  mortgages  usually  run  for  three  years.  At 
maturity  the  investor  can  ask  for  payment  of  the  loan.  Many 
of  the  loans  are  extended  for  further  periods  of  three  years. 
Under  the  agreement  of  guarantee,  the  company  has  the 
privilege  of  taking  a  reassignment  of  the  loan  from  the  in- 
vestor. The  usual  practice  of  the  companies  is  to  pay  the 
principal  of  the  mortgage  to  the  investor  at  maturity  if  he 
desires  it,  but  in  order  to  avoid  being  called  upon  to  pay  the 
principal  of  guarantees  at  a  period  of  financial  stress,  they  may 
take  a  certain  number  of  months  (eighteen  months  is  the  rule 
with  one  company)  in  which  to  collect  the  principal  from  the 
owner  of  the  property. 

Guaranteed  mortgages  are  purchased  by  individual  investors 
and  institutions.  While  the  rate  of  interest  to  them  is  l/2  of  1  % 
less  than  the  mortgage  bears,  they  are  assured  both  safety  and 
freedom  from  trouble  and  worry. 

Building  loans. — Reference  has  been  made  to  the  building 
loan  mortgages  of  certain  institutions.  Other  lenders  make 
building  loans,  some  as  a  regular  business.  Three  methods 
may  be  described.  An  owner  of  land  may  sell  it  to  a 
builder  for  a  building  operation.  The  builder  may  need  not 
only  the  land  but  also  a  large  part  of  the  money  with  which 
to  erect  the  building.  In  fact  he  may  be  able  to  pay  only  a 
small  part  of  the  price  of  the  land  in  cash  and  expects  credit 
for  the  balance.  The  transaction  can  be  carried  through  by 
contracting  to  sell  the  land  and  to  take  back  part  or  all  of  the 
sales  price  on  a  purchase  money  mortgage.  The  contract  will 
further  provide  that  the  seller  shall  lend  to  the  borrower  a 
certain  sum  of  money  to  be  represented  by  a  building  loan  bond 
and  mortgage,  and  to  be  advanced  by  the  seller  at  various  stages 


MORTGAGE  LOANS  189 

of  construction  of  the  building.  In  some  cases  the  amount  due 
on  the  land  and  the  sum  advanced  or  to  be  advanced  on  the 
building  are  combined  in  one  mortgage.  In  other  cases  there 
are  two  separate  mortgage  instruments.  The  building  loan 
mortgage  is  often  made  as  a  permanent  first  mortgage  loan, 
to  run  for  a  definite  period  of  years,  with  or  without  amortiza- 
tion. The  land  mortgage  is  often  temporary,  that  is,  it  is  paid 
off  out  of  the  building  loan  advances,  or  it  is  made  subordinate 
to  the  building  loan  mortgage  (becoming  a  second  mortgage) 
and  is  payable  in  installments  for  a  fixed  period.  The  seller 
of  the  land  can  of  course  dispose  of  one  or  both  of  these  mort- 
gages if  he  wishes  to  do  so  and  thus  obtain  funds  for  further 
operations. 

Temporary  building  loans  are  made  by  some  operators  to 
finance  new  buildings.  The  loan  is  paid  when  the  building  is 
completed.  A  fee  is  charged  for  the  loan  in  addition  to  the 
interest  on  the  money  advanced.  The  borrower  pays  all  in- 
cidental expenses. 

Mortgage  loans  are  frequently  made  to  builders  under  an 
agreement  that  when  the  building  is  completed  the  loan  shall  be 
made  permanent — that  is,  it  is  extended  for  a  period  of  say 
three  or  five  years — such  loans  are  combination  building  and 
permanent  loans. 

In  the  case  of  every  building  loan,  under  the  laws  of  New 
York  and  many  States,  a  building  loan  agreement  must  be  filed 
in  the  office  of  the  clerk  of  the  county  in  which  the  land  is 
situated.  This  is  an  important  provision  of  the  law  and  must 
be  complied  with  in  order  to  preserve  the  character  of  the 
mortgage  lien.  The  building  loan  agreement  must  set  forth 
all  important  details  regarding  the  terms  of  the  loan  including 
a  statement  of  how  the  money  shall  be  advanced  to  the  bor- 
rower, that  is,  at  what  times  and  in  what  amounts.  (See 
appendix  forms  54  and  55). 

Participating  mortgages. — A  participating  mortgage  is  one 
in  which  two  or  more  persons  own  a  share.  These  persons  do 
not  own  the  entire  mortgage  jointly,  but  each  owns  a  specified 
interest  in  it.  A  mortgage  may  be  made  to  a  trustee  who  will 
issue  certificate  of  ownership  to  each  person  having  an  interest 
in  it.  As  payments  of  interest  and  principal  are  made,  each 
participant  receives  his  pro-rata  share.  An  arrangement  of  this 
kind  would  usually  mean  that  each  ownership  in  the  mortgage 
was  coordinate.  In  some  participating  mortgages,  the  owner- 


190    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

ships  are  not  coordinate,  but  one  may  rank  ahead  of  another. 
An  owner  may  wish  to  secure  a  mortgage  of  a  certain  amount 
but  on  application  to  a  lender  may  find  the  lender  willing  to  give 
a  smaller  amount.  There  may  be  some  one  else  however  who 
will  take  the  difference  subject  to  the  first  lenders  amount,  so  the 
mortgage  is  made  for  the  total  amount  and  is  usually  made  to 
the  first  or  largest  lender  and  the  securities  placed  in  his  posses- 
sion. An  agreement  is  made  between  the  two  lenders  called  a 
participation  agreement,  or  ownership  agreement,  in  which  the 
mortgage  is  described  and  in  which  it  is  set  forth  that  one  party 
owns  the  mortgage  to  the  extent  of  a  certain  amount  of  prin- 
cipal and  interest  only,  and  that  the  other  party  owns  the 
balance  of  the  mortgage  debt,  but  that  the  ownership  of  the 
first  party  is  superior  to  that  of  the  second  party  as  though  one 
held  a  first  mortgage  for  his  share  and  the  other  a  second 
mortgage  for  the  remainder.  The  share  of  one  lender  in  a 
participating  mortgage  of  this  kind  is  called  a  prior  participa- 
tion, and  that  of  the  other  lender  a  subordinate  participation. 

Collateral  trust  real  estate  bonds. — There  is  a  plan  of  mort- 
gage lending  which  has  some  special  features  and  under  which 
bonds  are  issued  and  sold  to  investors.  Under  this  plan  mort- 
gages of  various  amounts,  large  and  small,  are  assigned  to  and 
deposited  with  a  trustee  by  a  mortgage  company.  The  mort- 
gages are  the  collateral  for  the  bonds  which  are  issued  by  the 
mortgage  company.  Mortgages  held  by  the  trustee  must  always 
equal  or  exceed  the  amount  of  bonds  outstanding.  As  mort- 
gages are  paid  or  withdrawn  from  the  trustee,  other  mort- 
gages are  assigned  to  replace  them.  Mortgages  are  made  in 
accordance  with  certain  strict  requirements  as  to  security, 
location,  character  of  property,  etc.  These  requirements  are 
sometimes  set  forth  in  the  collateral  trust  agreement.  Each 
bond  has  a  certification  by  the  trustee  that  it  is  one  of  an  issue 
secured  by  the  mortgages  deposited  under  the  collateral  trust 
agreement. 

Bonds  are  issued  in  convenient  denominations.  They  are  the 
obligation  of  the  mortgage  company  secured  by  the  deposit  of 
real  estate  mortgages  with  the  trustee.  When  issued  by  a  cor- 
poration in  good  standing  they  should  be  sound  investments. 

The  Prudence-Bonds  of  The  Prudence  Company,  Inc., 
already  referred  to  in  this  chapter,  and  bonds  issued  by  the 
Mortgage  Bond  Company  of  New  York  City  are  examples 
of  collateral  trust  bonds.  The  first  of  these  corporations 


MORTGAGE  LOANS  191 

advertises  that  its  bonds  are  nothing  more  or  less  than  first 
mortgages  of  the  highest  type  divided  into  denominations 
to  meet  the  requirements  of  the  average  investor;  that  the  cor- 
poration deposits  with  the  trust  company  a  number  of  prime 
first  mortgages  which,  taken  together,  form  a  trust  fund;  that 
the  bonds  are  issued  in  denominations  of  $100,  500  and  $1,000 
and  are  authenticated  by  the  trust  company;  and  that  each 
bond  is  secured  not  by  one  mortgage,  but  by  every  mortgage 
deposited  with  the  trust  company. 

Unsound  debenture  issues. — There  is  a  wide  difference  be- 
tween a  bond  secured  by  one  or  more  real  estate  first  mortgages, 
and  an  unsecured  debenture  bond.  The  former  has  definite  real 
property  pledged  to  secure  it  in  addition  to  the  bondsman's 
obligation,  the  latter  is  an  agreement  to  repay  the  principal 
and  interest,  but  with  no  property  specifically  pledged  as 
security.  In  fact,  the  property  of  a  corporation  issuing  deben- 
ture bonds  is  usually  encumbered  by  one  or  more  mortgages, 
so  that  the  company  owns  merely  equities.  The  property  may 
be  lost  through  foreclosure  or  its  value  may  decrease.  Should 
the  company  fail,  the  debenture  bond  holders  become  general 
creditors.  No  debenture  bond  should  be  purchased  except 
after  careful  inquiry  into  the  affairs  of  the  company  and  an 
appraisal  of  the  real  estate  equities  and  other  assets  it  owns. 

Mortgage  loan  brokers. — There  is  a  large  business  con- 
ducted by  brokers  in  placing  mortgage  loans.  The  broker  acts 
as  an  intermediary.  His  services  are  of  value  to  the  borrower 
who  wants  the  money  and  the  lender  who  wishes  to  invest  his 
funds.  His  work  consists  in  getting  applications  for  loans, 
putting  them  into  proper  shape  and  then  finding  lenders  both 
able  and  willing  to  make  the  loans. 

There  are  several  things  to  be  considered  by  a  broker  in 
connection  with  the  loan  application.  First,  is  it  really  a  de- 
sirable loan — that  is,  is  the  property  of  sufficient  market  value 
to  warrant  the  loan  asked.  The  owner  may  have  an  ex- 
aggerated idea  of  the  value  of  his  property  and  the  loan  he  asks 
may  be  more  than  the  broker,  from  his  experience,  knows  he 
will  be  able  to  place.  The  broker  may  have  to  secure  expert  ap- 
praisals of  the  property,  and  may  have  to  try  to  get  the  appli- 
cant to  agree  to  reduce  the  amount  of  his  application  to  a  more 
conservative  one  based  on  the  appraised  value  of  the  property. 
The  broker  also  considers  the  type  of  improvement  on  the  prop- 
erty. Is  it  a  specialty  such  as  a  theatre,  church  or  garage?  If 


192    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

so  he  will  realize  that  the  proportion  of  loan  to  value  should 
be  smaller  than  that  of  standard  properties.  He  will  also  con- 
sider the  places  where  he  will  be  likely  to  have  his  application 
considered.  His  sources  of  funds  may  include  savings  banks, 
title  companies,  mortgage  guarantee  companies,  life  insurance 
companies,  or  private  investors.  He  tries  to  secure  the  loan  at 
one  of  these  places,  but  he  usually  knows  in  advance  where  his 
chances  of  success  are  best.  Lenders  are  choosers.  They  accept 
the  applications  they  like  best.  If  a  broker  knows  the  property 
which  is  the  subject  of  an  application,  knows  its  value  and  pos- 
sibilities, and  is  himself  convinced  of  the  merits  of  the  loan,  he 
ought  to  be  able  to  make  a  convincing  argument  for  it  to  one 
with  funds  to  invest. 


CHAPTER  XVI 

THE  WORK  OF  THE  ARCHITECT 

The  architect's  relation  to  real  estate.— The  work  of  the 
architect  is  of  importance  to  those  engaged  in  the  real  estate 
business  in  many  respects.  He  is  consulted  by  those  who  wish 
to  erect  a  building  on  land  they  own  and  by  those  who  contem- 
plate the  purchase  of  land  for  a  building  operation.  The  owner 
determines  the  type  of  building  to  be  erected,  that  is,  whether 
it  is  to  be  a  private  dwelling,  an  apartment  house,  or  a  com- 
mercial building,  and  he  furnishes  the  architect  with  a  diagram 
or  description  of  the  plot.  From  this  information,  the  archi- 
tect advises  concerning  the  size  and  shape  of  the  proposed 
building,  the  arrangement  of  the  rooms,  and  its  probable  cost. 
The  information  furnished  by  him  often  assists  in  determining 
whether  the  building  will  be  a  success  commercially  or  not. 

The  architect  is  employed  to  draw  finished  plans  and  specifi- 
cations for  proposed  buildings  and  for  alterations  and  additions 
to  existing  buildings.  He  prepares  and  approves  contracts  for 
the  work  to  be  performed,  he  approves  payments  to  contrac- 
tors, and  watches  the  progress  of  the  building  during  construc- 
tion. He  guards  the  interests  of  his  employer  against  fraud, 
overcharges,  inferior  work,  delays  and  violations  of  law.  His 
work  is  sometimes  in  the  interests  of  the  mortgagee,  reporting 
to  the  mortgagee  on  the  quality  of  the  material  and  the  work- 
manship of  the  building.  The  architect  often  furnishes  figures 
which  are  used  as  a  basis  for  fixing  the  amount  to  be  loaned.  If 
the  mortgage  is  advanced  as  a  building  loan,  the  advances  are 
often  made  on  certificates  of  the  architect. 

Preliminary  rough  sketches. — The  initial  drawings  made 
by  the  architect  are  called  rough  sketches.  These  rough  sketches 
are  merely  diagrams  of  the  proposed  building  showing  the 
division  of  the  floor  space  into  rooms,  closets  and  halls,  and 
the  location  of  doors  and  windows.  They  are  not  detailed 
drawings,  but  they  do  show  the  dimensions  of  the  rooms.  They 
are  drawn  to  show  how  the  building  can  be  fitted  to  the  lot  and 
how  the  space  can  best  be  utilized.  They  are  often  used  for  the 
purpose  of  figuring  estimated  costs  of  the  building. 

193 


194   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

In  the  preparation  of  rough  sketches  the  architect  takes  into 
consideration  the  building,  tenement  and  sanitary  codes  and 
restrictions  on  the  property,  if  any  (whether  imposed  privately 
or  by  governmental  authority).  He  will  also  consider  the  re- 
lation of  adjoining  buildings  to  the  plot  in  so  far  as  they  affect 
the  light  and  air  for  the  proposed  building.  It  is  important  that 
the  maximum  amount  of  light  be  obtained  for  all  the  rooms. 

The  architect  often  furnishes  with  the  rough  sketches,  one  or 
more  drawings  showing  how  the  front  of  the  building  will  look 
on  completion.  These  are  drawn  with  the  idea  of  creating  a 
building  having  not  only  a  well  arranged  interior  but  also  an 
attractive  exterior  appearance. 

Working  drawings. — When  the  arrangement  of  the  floor 
space  of  a  proposed  building  has  been  decided  upon,  the  archi- 
tect prepares  working  drawings,  or  plans,  for  it.  These  plans 
are  drawn  to  scale  and  show  in  minute  detail  and  with  exact 
dimensions  each  floor  of  the  building.  Exterior  elevations  are 
also  shown.  The  plans  indicate  the  arrangement  of  the 
plumbing,  heating  and  lighting  systems. 

In  some  cities,  a  copy  of  the  plans  must  be  filed  with  the  build- 
ing department  of  the  city  before  the  work  may  be  commenced. 
If  the  department's  approval  of  the  plans  is  obtained,  a  permit 
for  building  is  issued. 

Contractors  are  furnished  with  copies  of  the  plans  for  the 
purpose  of  having  them  figure  on  the  work  and  obtaining  their 
bids.  When  the  work  has  been  awarded,  the  contractor,  or  the 
various  contractors,  use  the  plans  as  guides.  They  are  required 
to  build  exactly  according  to  the  plans.  It  is  sometimes  neces- 
sary for  the  architect  to  prepare  and  furnish  to  contractors 
special  detail  drawings  for  the  steel  work,  stone  work,  trim  and 
other  mill  work,  cornices,  etc. 

In  connection  with  the  preparation  of  plans,  it  is  usual  to 
have  a  diagam  or  survey  of  the  lot  prepared  by  a  competent 
surveyor.  This  survey  will  show  all  that  is  usual  on  an  ordi- 
nary survey,  and,  in  addition,  the  location  and  height  of  adjoin- 
ing buildings,  the  depth  of  the  sewer  below  the  street  level,  the 
pitch  of  the  curb,  and  the  location  of  the  stakes  or  marks  the 
surveyor  has  placed  on  the  lot  or  adjoining  walls. 

It  is  often  necessary  to  ascertain  whether  the  walls  of  adjoin- 
ing buildings  are  plumb;  they  frequently  lean,  that  is,  they  are 
correct  at  the  bottom  but  project  at  the  top.  A  leaning  wall 
may  interfere  with  the  erection  of  a  steel  frame  building.  In- 


THE  WORK  OF  THE  ARCHITECT          195 

quiry  should  be  made  as  to  the  depth  below  the  surface  of  the 
neighbor's  walls.  It  may  be  necessary  to  support  them,  en- 
tailing additional  expense.  Local  laws  affecting  buildings  will 
govern  as  to  which  owner  must  provide  the  support. 

Specifications. — Specifications  are  prepared  by  the  architect 
for  the  purpose  of  giving  the  owner,  the  builder,  and  the  con- 
tractors full  and  accurate  descriptions  (kind,  quality  and  dimen- 
sions) of  the  various  materials  and  appliances  to  be  used  in  the 
building  and  the  manner  in  which  the  various  parts  of  the 
work  are  to  be  performed.  The  specifications  are  sub-divided 
so  that  a  part  of  them  applies  to  each  of  the  trades  to  be  em- 
ployed. They  are  used  in  connection  with  the  plans  in  making 
up  estimates  of  the  cost  of  the  building.  The  specifications  be- 
come part  of  the  agreement  with  the  contractors  and  they  are 
required  to  make  their  work  and  materials  conform  to  its 
requirements. 

The  architect's  services. — Sometimes  the  architect  is  em- 
ployed only  to  prepare  preliminary  rough  sketches  and  the 
plans  and  specifications  for  a  building,  and  having  furnished 
these,  the  owner  proceeds  without  him.  At  other  times  the 
architect  is  employed  as  the  owner's  representative  in  connec- 
tion with  the  construction  of  the  building.  In  this  capacity  he 
may  perform  some  or  all  of  the  following  services:  obtain  bids 
from  contractors,  award  contracts  to  successful  bidders,  super- 
intend the  construction  work,  approve  payments  to  those  en- 
titled to  them,  settle  disputes,  if  any  arise,  and  obtain  necessary 
permits  from  authorities  having  jurisdiction.  The  architect 
sometimes  renders  the  owner  an  opinion  as  the  cost  of  a  build- 
ing in  advance  of  the  commencement  of  the  work,  but  he  is  not 
bound  by  the  estimate  unless  it  is  part  of  the  agreement  with 
him. 

The  following  is  taken  from  the  yearbook  of  the  New  York 
Society  of  Architects.  It  is  in  accord  with  the  rules  of  the 
American  Institute  of  Architects. 

THE  ARCHITECT'S  SERVICES 

"The  architect's  services  comprehend  the  preliminary 
studies,  the  drawings,  the  specifications,  the  permits,  the  detail 
drawings  and  the  supervision  of  the  work. 

"The  architect's  fee  is  based  upon  the  total  cost  of  the  work 
and  minimum  fee  is  6  per  cent.  The  total  cost  comprehends 


196   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

all  the  material  and  labor  necessary  to  make  the  structure  com- 
plete, plus  the  contractor's  profits,  and  all  articles  purchased 
under  his  direction,  and  the  fee  is  base£  on  the  value  of  new 
materials.  When  the  architect  is  not  retained  to  supervise  the 
work,  consultation  fees  and  professional  advice  are  to  be 
charged  according  to  the  services  rendered.  The  services  of 
specialists  are  to  be  separate  from  the  architect's  commission. 
The  entire  fee  is  payable  in  the  following  apportionments  : 


Preliminary  studies  .............................     1  1 

Drawings  ......................................     3  I  _ 

Specifications 
Permits 


1  ( 
1  J 


Detail  Drawings   ...............................     3  {  __    ^ 

Supervision    ....................................     3  j 

Total     .....................................   12     =6% 

"This  fee  is  for  ordinary  professional  work  and  does  not 
include  specialized  services. 

Exceptions 

Dwellings  costing  less  than  $5,000,  commission  .................  10% 

Lofts  not  requiring  special  planning  for  machinery,  commission..  5% 

Alterations  to  dwellings,  commission  ...........................  12% 

Alterations  to  business  buildings,  commission  .................  ,  .  .  10% 

"The  PRELIMINARY  STUDIES  include  the  necessary  confer- 
ences, inspections,  studies,  and  sketches  to  determine  the  prob- 
lem of  his  client. 

"The  DRAWINGS  consist  of  the  plans,  elevations,  and  sec- 
tions to  give  the  competent  builder  a  clear  understanding  of 
all  the  structural  conditions. 

"The  SPECIFICATIONS  contain  the  statement  of  all  the  ma- 
terial entering  into  the  construction,  the  question  of  quality  and 
the  character  of  the  workmanship. 

"The  PERMITS  comprehend  the  plans  and  specifications 
which  are  required  by  the  City  Departments  for  approval  of 
the  sanitary  and  structural  requirements  of  the  Code. 

"The  DETAIL  DRAWINGS  are  the  necessary  supplementary 
drawings  to  illustrate  the  material  described  in  the  specifica- 
tions and  the  enlarged  drawings  of  miniature  detail. 

"The  SUPERVISION  of  the  architect  means  the  inspection  of 


THE  WORK  OF  THE  ARCHITECT  197 

the  work  during  its  progress  to  ascertain  if  it  is  in  conformity 
with  the  plans  and  specifications.  In  this  the  architect  has 
authority  to  order  necessary  changes,  to  act  in  emergencies 
arising  during  construction,  to  reject  any  part  of  the  work  not 
in  accordance  with  the  drawings  and  specifications  and  to  order 
its  removal  and  reconstruction. 

"Continuous  personal  superintendence  of  the  architect  or  his 
clerk-of -works,  is  not  included  in  supervision.  Such  service  is 
to  be  charged  in  addition  to  the  regular  commission. 

"The  drawings  and  specifications  are  instruments  of  service 
and  as  such  should  remain  the  property  of  the  architect." 

Methods  of  payment  for  work. — There  are  three  methods 
of  compensating  contractors  for  work  performed,  viz. — 

(a)  A  fixed  price  for  the  work.     Under  this  method  the 
•owner  knows  the  cost  at  the  time  he  enters  into  the 
contract.     The  contractor  estimates  that  the  price  will 
enable  him  to  perform  the  work  and  obtain  a  profit  on 
the  contract. 

(b)  Actual  cost  plus  a  percentage.    Under  this  method  the 
owner  pays  for  the  job  only  its  actual  cost  in  labor  and 
material,  but  pays  the  contractor  a  percentage,  usually 
10%,  on  the  cost  as  compensation  for  his  services.    The 

owner  limits  the  profit  of  the  contractor  to  the  amount 
of  the  percentage.  There  is  no  reason  for  the  contractor 
to  perform  inferior  work  as  the  owner  pays  its  cost, 
but  on  the  other  hand  there  is  no  inducement  to  econ- 
omy as  the  larger  the  cost  the  larger  the  contractor's 
profit.  A  reliable  contractor  will,  however,  in  fair- 
ness to  his  employer,  and  to  add  to  his  own  reputation, 
aim  to  keep  the  cost  down. 

(c)  Cost  plus  a  percentage,  with  the  total  limited.    Under 
this  plan  the  owner  pays  cost  plus  a  percentage  as  under 
the  last  described  plan,  but  there  is  an  added  feature 
in  that  the  contractor  agrees  that  in  no  event  shall  the 
total  cost  of  the  work  exceed  a  specified  sum.     This 
method  places  a  guaranteed  limit  upon  the  cost. 

There  are  several  methods  of  making  payments  to  contractors 
during  the  progress  of  the  work.  One  is  that  of  paying  a 
proportion  of  the  value  of  the  work  completed  at  stated  periods, 
as,  for  example,  it  may  be  agreed  that  the  contractor  shall 
receive  85%  of  the  value  of  the  work  completed  each  month, 
final  payment  being  due  thirty  days  after  completion  of  the  con- 


198    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

tract.  Another  method  is  to  have  definite  amounts  or  per- 
centages payable  upon  the  work  reaching  certain  stages.  An 
example  of  this  would  be  an  agreement  under  which  the  owner 
of  a  building  under  construction  pays  a  certain  amount  when  the 
framing  is  up,  a  second  payment  when  the  building  is  enclosed, 
a  third  when  brown  plaster  is  on,  etc. 

It  is  not  usual  that  payments  to  contractors  before  com- 
pletion are  for  the  full  value  of  the  work  accomplished.  The 
amounts  held  back  are  known  as  retained  percentages. 

Form  of  contract. — A  contract  in  general  use  between  the 
contractor  and  the  owner  is  known  as  the  "Uniform  Contract." 
A  copy  of  this  agreement  is  reproduced  in  the  appendix  (form 
86).  This  contract  describes  the  work  to  be  performed  or 
material  to  be  furnished,  the  conditions  and  stipulations  re- 
garding the  work  and  its  progress,  the  price  to  be  paid  and  the 
time  and  manner  of  payment.  There  is  also  reproduced  in  the 
appendix  (form  85)  a  form  of  contract  between  the  owner  and 
the  architect  in  which  the  services  of  the  architect  are  described 
and  his  fee  agreed  upon. 

Decisions  by  the  architect. — When  the  architect  is  employed 
to  superintend  the  construction,  he  may  reject  any  part  of  the 
work  not  conforming  to  the  specifications.  In  considering  the 
rejection  of  any  work,  or  in  deciding  any  controversy  between 
owner  and  contractor,  he  must  be  impartial.  His  judgment 
should  be  fair  to  both  sides  even  'though  he  is  retained  and  paid 
by  the  owner. 

Necessary  certificates. — In  many  places,  the  authorities  re- 
quire certain  certificates  to  be  issued  before  a  new  building  may 
be  used  for  the  purpose  for  which  it  was  constructed.  These 
may  include  a  building  department  certificate,  showing  that  the 
building  code  has  not  been  violated;  a  tenement  house  depart- 
ment certificate  permitting  occupancy  of  the  building  by  three 
or  more  families;  certificates  of  boards  of  fire  underwriters 
and  departments  of  gas  and  electricity  as  to  electric  wiring, 
motors  and  fixtures;  and,  in  the  case  of  factories  and  loft 
buildings,  certificates  showing  the  weight  which  the  various 
floors  will  sustain. 

Planning  buildings. — A  suggestion  may  be  made  regarding 
some  of  the  principles  upon  which  some  buildings  are  planned 
Among  these  are  economy  of  construction,  economy  of  opera- 
tion, a  maximum  of  rentable  space  and  facilities  to  attract  and 
retain  tenants.  In  apartments,  the  location  of  stairs,  elevators, 


THE  WORK  OF  THE  ARCHITECT          199 

and  dumb-waiters  must  be  considered;  the  rooms  of  each  apart- 
ment must  be  conveniently  arranged;  there  must  be  sufficient 
privacy  but  there  should  not  be  too  much  space  devoted  to 
halls.  A  steam  heated  apartment  will  be  arranged  differently 
from  one  in  which  the  tenant  heats  his  own  rooms.  In  the  latter 
the  kitchen  is  often  the  most  important  room. 

Factory  and  loft  buildings  are  planned  so  as  to  have  each 
floor  receive  as  much  light  as  possible.  Plumbing  facilities  and 
elevators  are  placed  so  that  if  floors  are  sub-divided  each  tenant 
will  be  supplied. 


CHAPTER  XVII 

THE  TORRENS  SYSTEM  OF  LAND  TITLE 
REGISTRATION 

Origin  of  the  system. — The  idea  of  a  system  of  land  title 
registration  originated  with  Sir  Robert  Torrens  of  Australia, 
and  has  generally  become  known  as  the  "Torrens  System." 
Sir  Robert  Torrens  was  a  business  man  who  had  been  a  Collector 
of  Customs  in  charge  of  shipping.  In  this  position  he  became 
familiar  with  a  law  under  which  ships  were  registered,  under 
the  practice  of  which  the  registry  showed  the  name  or  names 
of  the  owners  of  the  vessel  and  all  liens  and  incumbrances 
against  it.  It  was  required  that  all  liens  or  claims  be  noted 
on  the  registry,  so  that  any  inspection  would  show  briefly  and 
simply  the  condition  of  the  title.  Later  Sir  Robert  Torrens 
became  Registrar-General  of  South  Australia.  His  experience 
with  shipping  led  him  to  believe  that  the  principle  of  registra- 
tion of  titles  could  be  applied  to  land  as  well  as  ships.  In  1857 
he  introduced  a  bill  providing  for  the  registration  of  land  titles, 
This  bill  became  a  law  in  South  Australia  January  27,  1858, 
and  went  into  effect  on  July  1,  1858.  The  idea  spread  rapidly. 
British  Honduras  in  Central  America  passed  a  Land  Registering 
Act  the  same  year,  1858.  Queensland,  Tasmania  and  Victoria 
followed  in  1861.  New  South  Wales  in  1862,  New  Zealand  in 
1870,  West  Australia  in  1874,  Fiji  in  1876.  Other  British 
colonies  have  since  adopted  the  system. 

The  system  in  England. — While  we  have  said  that  the  idea 
of  a  system  of  land  title  registration  spread  rapidly,  it  must 
also  be  said  that  the  speed  does  not  seem  to  have  been  main- 
tained. A  Land  Registry  Act,  known  as  the  uLord  Westbury 
Act,"  was  passed  in  England  in  1862.  The  law  was  a  failure 
and  was  repealed  in  1875.  Only  411  titles  were  registered  in 
the  13  years.  It  has  been  stated  by  Mr.  Torrens  and  others 
that  the  law  did  not  follow  the  original  Torrens  Act,  but  di- 
verted from  it  in  many  essential  features.  The  Act  of  1875, 
which  repealed  this  law,  was  known  as  the  "Lord  Cairns  Act." 

200 


THE  TORRENS  SYSTEM  201 

It  simplified  the  system  and  corrected  many  of  the  mistakes 
of  the  old  law.  It  failed,  however,  to  provide  an  assurance 
fund  out  of  which  losses  could  be  paid.  This  defect  was  a  se- 
rious one — compensation  for  loss  to  the  injured  through  error 
or  otherwise  was  lacking.  Under  a  new  act  in  1897,  an  assur- 
ance fund  was  provided,  the  national  treasury  making  good  any 
deficiency.  Registration  became  compulsory  in  the  County  of 
London  by  the  same  act.  The  records  show  that  3,825  titles 
were  registered  in  England  and  Wales  in  the  20  years  from 
1875  to  1895,  and  that  in  the  following  10  years,  91,284  titles 
were  registered  in  London  alone. 

England  evidently  did  not  get  a  workable  Torrens  system 
until  nearly  40  years  after  her  colony,  South  Australia,  had 
one.  The  system,  however,  had  to  struggle  against  conditions 
peculiar  to  English  land  ownership.  The  law  of  entail  prevails, 
and  many  English  freeholds  are  inalienable,  the  owner  in  posses- 
sion having  only  a  life  interest.  Great  landed  estates  exist  and 
a  large  proportion  of  the  land  is  in  the  hands  of  comparatively 
few  persons.  England  was  jealous  of  its  customs  and  the  law- 
yers were  opposed  to  changes.  However,  in  spite  of  the 
handicaps,  the  Torrens  system  seems  to  have  been  successfully 
adopted. 

The  system  in  the  United  States. — The  Torrens  System  has 
had  only  a  fair  amount  of  success  in  this  country.  The  first  act 
in  the  United  States  was  that  of  Illinois,  in  1895.  It  was  de- 
clared unconstitutional  by  the  Supreme  Court  of  the  State,  but 
was  amended  in  1897  so  as  to  remove  the  constitutional  objec- 
tions. It  was  further  amended  in  1907.  Massachusetts  passed 
a  Torrens  law  in  1898  which  has  been  considered  successful. 
Amendments  to  this  law  were  made  in  1899,  1900,  1902  and 
1905.  There  was  an  Ohio  act  in  1896  which  however,  did  not 
meet  a  judicial  test  and  which  was  repealed  in  1898.  It  was 
re-enacted  in  1912,  a  constitutional  amendment  receiving  popu- 
lar approval.  New  York  enacted  a  Torrens  law  in  1908,  which 
as  some  one  has  said  udid  not  even  begin."  It  was  also  described 
as  being  the  worst  registration  law  in  the  world.  An  amend- 
ment in  1910  did  not  help  it,  but  rather  insured  its  failure. 
Important  amendments  were  made  to  the  law  in  1916  and 
1918.  These  amendments  were  designed  to  correct  the  defects 
in  the  previous  law  and  to  make  the  system  more  workable  and 
popular.  Opinions  regarding  the  present  law  differ,  but  it  is 
an  undeniable  fact  that  land  title  registration  is  not  popular  in 


202    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

New  York.  The  number  of  titles  registered  is  negligible  (less 
than  40  in  New  York  County  up  to  July,  1921). 

The  following  nineteen  States  have  adopted  Torrens  system 
laws:  California,  Illinois,  Massachusetts,  Oregon,  Minnesota, 
Colorado,  Washington,  New  York,  North  Carolina,  Ohio, 
Mississippi,  Nebraska,  South  Carolina,  Virginia,  Georgia,  Utah, 
North  Dakota,  South  Dakota  and  Tennessee.  From  present 
indications,  the  law  is  evidently  of  no  practical  use  in  a  number 
of  these  States.  It  seems,  in  fact,  that  as  to  the  United  States, 
only  in  Massachusetts  and  in  Cook  County,  Illinois,  has  it  at- 
tained any  degree  of  success.  Those  who  favor  the  Torrens 
system  assert  that  only  in  the  last-mentioned  places,  and  under 
the  Federal  laws  of  the  Philippine  Islands  and  Hawaii  is  there 
a  true  enactment  of  the  system. 

Definition  of  the  Torrens  system. — The  system  has  been  de- 
fined by  its  creator,  Sir  Robert  Torrens,  as  follows : 

"The  person  or  persons  in  whom  singly  or  collectively  the  fee 
simple  is  vested,  either  in  law  or  in  equity,  may  apply  to  have 
the  land  placed  on  the  register  of  titles.  The  applications  are 
submitted  for  examination  to  a  barrister  and  to  a  conveyancer, 
who  are  styled  'examiners  of  titles.'  These  gentlemen  report 
to  the  register:  First:  Whether  the  description  of  land  is  defi- 
nite and  clear.  Second :  Is  the  applicant  in  undisputed  posses- 
sion of  the  property?  Third:  Does  he  appear  in  equity  and 
justice  rightfully  entitled  thereto?  Fourth:  Does  he  produce 
such  evidence  of  title  as  leads  to  the  conclusion  that  no  other 
person  is  in  position  to  succeed  against  him  in  an  action  for 
ejectment?" 

The  essentials  of  a  Torrens  system  are  embraced  in  the  fol- 
lowing summary : — 

(a)  Application  of  owner  in  possession  for  registration  of 
his  title  to  the  land. 

(b)  Official  examination  of  the  title  to  determine  the  owner- 
ship and  the  liens  and  claims  against  it. 

(c)  Notice  to  all  interested  parties  of  the  application  for 
registration.    This  takes  the  form  of  an  action  at  law. 

(d)  Judicial  determination  of  the  title  sought  to  be  regis- 
tered.   This  involves  a  determination  by  the  court  of  the  parties 
to  be  named  or  described  as  defendants,   proper  service   of 
Court's  process,  a  trial  and  judicial  taking  of  evidence,  and  a 
final  order  or  decree. 

(c)    Registration  of  the  title  and  issuance  of  a  certificate. 


THE  TORRENS  SYSTEM  203 

This  certificate  must  be  conclusive — the  registered  title  must 
be  indefeasible,  i.e.,  good  against  all  the  world. 

(f)  An  assurance  fund  out  of  which  losses  may  be  paid. 
Losses  arise  through  errors  of  law  or  fact  made  in  the  registra- 
tion of  a  title.    Indemnity  should  be  provided  for  those  wrong- 
fully and  permanently  deprived  of  the  land  or  any  interest  in 
it  through  the  indefeasibility  of  the  registered  title. 

(g)  Permanency  of  registration — there  should  be  no  privi- 
lege of  withdrawal — the  land  once  in  the  system  must  remain 
there  forever.    This  is  a  feature  of  the  system  which  has  often 
been  criticized,  but  which  advocates  of  the  system  claim  is 
essential. 

(h)  A  simple,  speedy  and  cheap  procedure.  Too  much  time 
and  money  cannot  be  spent  on  the  initial  registration.  Subse- 
quent transfers  of  the  certificate  should  be  readily  effected  at 
a  small  cost. 

The  law  in  New  York. — The  land  title  registration  law  is 
found  in  Article  12,  Sections  370  to  435,  inclusive,  of  the  Real 
Property  Law.  It  may  be  summarized  as  follows : — 

1.  The  person  wishing  to  register  the  title  to  his  property 
files  an  application  in  the  form  of  a  verified  petition  with  the 
County  Clerk  of  the  county  in  which  the  property  is  situated. 
The  application  is  made  to  the  Supreme  Court  and  a  final  order 
of  the  Court  has  the  effect  of  a  judgment,  which  operates  di- 
rectly on  the  land  and  vests  title  thereto.    If  any  issue  is  raised 
it  is  tried  in  Court.     Only  persons  who  own  the  land  in  fee 
simple  and  who  hold  and  possess  it  (or  who  have  the  power  of 
appointment  or  disposition  of  the  fee)  may  apply  for  registra- 
tion, except  that  holders  of  a  contract  of  purchase  made  with 
the  owner  of  the  fee,  may  apply,  but  registration  is  not  made 
until  there  is  a  transfer  of  title  under  the  contract.     No  estate 
or  interest,  less  than  an  estate  in  fee  simple  may  be  registered 
unless  the  fee  has  first  been  registered. 

2.  County  Clerks  (or  County  Registers  if  there  be  a  Regis- 
ter )are  made  Registrars  of  title.     The  Registrar  is  required 
to  file  a  bond.    He  may  appoint  one  or  more  deputies,  and  he 
receives  compensation  for  his  services.    The  Registrar  also  ap- 
points "official  examiners  of  title. "     These  official  examiners 
must  be  attorneys  and  counsellors-at-law,   and  appointments 
are  made  in  accordance  with  rules  as  to  qualifications  prescribed 
by  the  Court  of  Appeals,  and  also  in  accordance  with  the  State 
Civil  Service  rules. 


204   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

3.  The  petition  for  registration  of  a  title  must  contain: 

(a)  The  names  and  addresses  of  the  petitioners. 

(b)  Whether  petitioners  are  married  and  if  so  the  names 
and  addresses  of  husband  or  wife  of  each.     If  divorced,  par- 
ticulars of  the  divorce  must  be  given. 

(c)  Whether  petitioners  are  of  full  age.     If  minors,  age 
must  be  stated,  and  if  otherwise  disabled,  particulars  must  be 
given,  also  authority  of  persons  acting  for  such  persons. 

(d)  The  names  of  all  persons  having  or  claiming  interests 
in  or  liens  upon  the  property  or  any  part  of  it ;  and  whether  such 
persons  are  infants  or  otherwise  incapacitated,  the  owners  as 
far  as  known  or  as  far  as  can  be  reasonably  ascertained  of  the 
surrounding  property,  the  People  of  the  State  of  New  York, 
all  persons  who  have  filed  cautions,  such  additional  persons  as 
the  Court  designates,  and  "all  other  persons,  if  any,  having 
any  right  or  interest  in  or  lien  upon  the  property  affected  by 
this  action,  or  any  part  thereof." 

(e)  Description  of  the  land,  whether  vacant  or  improved, 
nature  of  improvement,  names  of  occupants  and  nature  of  oc- 
cupancy (unless  tenants  for  less  than  one  year). 

(f)  A  statement  of  the  estate  sought  to  be  registered,  the 
value  of  the  property  based  on  the  last  assessment  for  local  taxa- 
tion,  particulars   of  all  mortgages,   and  other   incumbrances 
known  to  petitioners. 

(g)  A  prayer  that  the  title  be  registered  as  belonging  to 
and  vested  in  the  petitioner,  or  as  the  facts  may  require  at  the 
time  of  such  registration. 

The  Court  upon  the  filing  of  the  petition  refers  the  matter 
to  an  official  examiner.  The  Registrar  is  directed  to  give  no- 
tice to  the  parties  affected  by  the  action.  The  official  examiner 
files  a  preliminary  report  as  to  sufficiency  of  the  parties  named 
in  the  petition  and  what  additional  parties,  if  any,  should  be 
named.  The  official  examiner  then  examines  the  title  and 
makes  a  report  which  sets  forth  the  exact  state  and  condition 
of  the  title,  the  rights  of  the  petitioners  and  the  rights  of  all 
others  having  or  claiming  rights  or  interests  in  the  property  or 
liens  thereon.  The  report  contains  a  statement  as  to  whether 
all  persons  have  received  notice  of  the  application  for  registra- 
tion, and  as  to  whether  any  further  notice  should  be  given  to 
any  persons.  The  Court  may,  at  the  request  of  the  petitioner, 
refer  a  title  to  a  title  company  for  examination,  instead  of  to  an 
official  examiner. 


THE  TORRENS  SYSTEM  205 

The  Registrar  gives  notice  to  all  interested  persons  of  a 
hearing  to  be  held  not  less  than  20  days  or  more  than  60  days 
hence.  These  notices  are  sent  by  registered  mail,  demanding  a 
return  receipt,  to  those  whose  address  is  known.  The  notice  is 
published  in  a  newspaper  and  it  is  posted  in  a  conspicuous  place 
on  the  land.  The  Court  may  require  further  notice  to  be  given 
and  may  require  proof  of  actual  notice  to  all  adjoining  own- 
ers and  to  all  owners  who  appear  to  have  any  interest  in  or 
claims  to  the  land  to  be  registered.  The  Registrar  certifies 
as  to  the  service  made,  the  publication  and  posting  on  the 
land.  Any  controverted  matter  may  be  referred  to  the  official 
examiner. 

A  survey,  map  or  plan  must  be  made  of  the  property  and 
filed  with  the  petition,  or  filed  with  the  official  examiner  and 
included  in  his  report.  The  survey  must  show  encroachments, 
if  any,  and  must  be  accompanied  by  affidavit  of  the  surveyor. 
The  abstract  and  searches  of  title  are  filed  in  the  registrar's 
office  and  are  open  for  inspection. 

4.  Any  person  interested  in  the  property  may  appear  and 
defend  the  action  whether  named  in  the  proceeding  or  not. 
The  answer  must  state  all  objections  to  the  petition.  The  At- 
torney-General of  the  State  is  appointed  guardian  ad  litem  to 
represent  incompetents,  unless  the  State  has  an  adverse  claim, 
in  which  case  another  attorney  is  appointed. 

The  Court  may  find  and  decree  in  whom  title  or  any  right 
or  interest  is  vested,  may  determine  if  the  title  is  subject  to 
liens,  incumbrances,  estates,  rights,  liens  and  interests,  and  may 
direct  the  Registrar  to  register  the  title  subject  to  such  liens, 
dtc.  Taxes,  water  rates  and  assessments  must  be  paid  to 
date  or  registration  is  made  subject  to  them.  The  result  of 
the  proceeding  may  remove  clouds  in  the  title,  but  there  is 
nothing  about  it  which  will  make  a  bad  title  a  good  and  mar- 
ketable one. 

No  final  order  or  judgment  of  registration  shall  be  made 
unless  the  Court  is  satisfied  the  title  to  be  registered  is  free  from 
reasonable  doubt.  The  final  order  and  judgment  is  forever 
binding  and  conclusive  upon  the  State  of  New  York,  and  all 
persons  in  the  world  whether  mentioned  and  served  with  the 
notice  or  included  in  the  description  "all  other  persons,"  etc. 
There  is  no  exception  to  the  finality  as  to  infants,  lunatics, 
or  persons  under  other  disability  or  even  as  to  persons  not  in 
being. 


206    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

A  registration  may  be  set  aside  if  procured  by  fraud  unless 
the  rights  of  an  innocent  party  are  affected,  but  an  action  to 
set  it  aside  for  fraud  must  be  commenced  within  10  years  of 
registration.  An  action  to  set  aside  the  judgment  of  registra- 
tion or  to  modify  it  (except  on  the  ground  of  fraud)  must  be 
commenced  within  30  days  after  final  order  or  judgment. 

5.  Upon  entry  of  final  order,  an  enrollment  thereof  is  filed 
in  the  office  of  the  County  Clerk,  and  a  certified  copy  is  delivered 
to  the  Registrar.     The  Registrar  registers  the  title  and  issues 
a  certificate  of  it.     The  original  certificate  of  registration  re- 
mains in  the  office  of  the  Registrar.     It  states  the  name  or 
names  in  which  title   is  registered;  whether  married  or  un- 
married; name  of  husband  or  wife;  if  owner  is  a  minor,  his 
age;  if  under  disability,  the  facts  thereof  and  the  particulars 
of  all  estates,  mortgages,  other  liens,  etc.,  affecting  the  title. 
A  title  book  is  kept  having  a  separate  leaf  for  each  certificate. 
An  exact  duplicate  of  the  certificate  known  as  owner's  dupli- 
cate, is  made  and  delivered  to  the  owner.    The  owner  gives  a 
receipt  for  it,  thus  putting  his  signature  on  record'  in  the  Reg- 
istrar's office.     The  certificate  held  by  the  owner  shows  the 
title  he  holds  and  all  liens  and  incumbrances  against  it.     It 
will  also  be  subject  to  taxes,  water  rates  and  assessments  com- 
ing due  after  registration,  certain  leases  made  after  or  pend- 
ing registration,    easements  made   after  registration,   not  of 
record,  and  liens,  claims  and  rights  which  under  the  laws  and 
constitution  of  the  United  States  need  not  be  of  record. 

Liens  are  not  good  against  registered  property  unless  noted 
on  the  certificate  of  registration.  Adverse  possession  does  not 
run  against  a  registered  title. 

6.  Property  once   registered  must   remain  registered.      It 
cannot  be  withdrawn  from  registration.     There  exists  an  im- 
plied agreement  running  with  the  land  making  it  subject  to  the 
provisions  of  the  title  registration  law. 

When  the  title  to  registered  property  is  transferred  a  deed 
is  executed  by  the  grantors.  The  certificate  (owner's  dupli- 
cate) is  surrendered,  the  interested  parties  agree  upon  a 
statement  as  to  the  nature  and  effect  of  the  transfer,  the  old 
certificate  is  cancelled  and  the  Registrar  issues  a  new  one  to 
the  new  owner.  The  titles  does  not  pass  until  the  new  registra- 
tion has  been  completed.  The  deed  or  instrument  of  convey- 
ance must  contain  a  statement  as  to  whether  the  grantor  or 
grantors  are  married  or  unmarried. 


THE  TORRENS  SYSTEM  207 

If  part  of  a  piece  of  registered  property  is  transferred  a 
new  certificate  may  be  issued  to  the  old  owner  for  the  re- 
maining part.  The  law  also  provides  for  the  registration 
of  mortgages  and  leases  of  registered  property.  The  instru- 
ment is  filed  with  the  Registrar  accompanied  by  a  statement 
of  the  parties  as  to  its  nature  and  effect.  Proper  notation  is 
made  on  the  certificate.  Judgments,  decrees,  attachments,  and 
other  liens  may  be  noted  on  the  Registrar's  record  of  the  title, 
and  so  may  assignments  of  mortgages  and  releases  and  dis- 
charges of  incumbrances.  If  there  be  a  sale  of  registered 
property  at  foreclosure,  the  official  examiner  examines  the 
action  and  proceeding,  reports  on  it  to  the  court  and  to  the 
officer  making  the  sale.  The  deed  is  not  delivered  until  the 
official  examiner  reports  on  the  regularity  of  it.  Upon  pro- 
duction of  the  deed  and  report  of  the  official  examiner,  the 
Court  directs  registration  of  title  accordingly. 

If  the  owner  of  registered  property  dies  the  heirs  at  law 
or  devisees,  after  probate  of  will  and  issuance  of  letters,  may 
petition  the  court  for  an  order  directing  in  whose  name  or 
names  and  in  what  manner  the  title  shall  be  registered.  There 
shall  be  made  on  the  certificate  a  memorial  that  the  estate 
is  in  process  of  settlement.  After  final  settlement  of  the 
estate  this  memorial  can  be  removed.  Also  upon  the  coming 
of  age  of  a  minor,  or  the  termination  of  a  trust,  etc.,  proper 
notation  thereof  is  made  on  the  certificate.  An  executor  with 
power  to  sell  need  not  have  the  title  registered  in  him,  but 
the  person  to  whom  he  sells  must  have  it  registered. 

7.  Upon  registration  of  a  title  there  is  paid  to  the  Registrar 
a  sum  equal  to  1/10  of  one  percentum  of  the  value  of  the 
property  as  fixed  by  the  last  assessment  for  local  taxation. 
This  is  a  contribution  to  the  assurance  fund  and  is  paid  to 
the  County  Treasurer,  except  in  New  York  City,  where  pay- 
ment is  made  to  the  Chamberlain. 

Any  person  who  without  his  own  negligence  sustains  loss 
or  damage  or  is  deprived  of  real  property  or  any  estate,  right 
or  interest  therein  through  any  error,  omission  or  mistake 
on  a  certificate  of  title  shall  have  a  cause  of  action  against  the 
County  Treasurer  (or  in  New  York  City  the  Chamber- 
lain) to  recover  compensation.  Claims  are  paid  as  are  other 
claims  against  the  county.  In  New  York  City  they  must  be 
passed  upon  by  the  Registrar  and  the  Corporation  Counsel. 
The  claimant  has  a  right  of  action  if  his  claim  is  not  allowed. 


208    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No  claim,  however,  is  binding  against  the  county  for  any 
amount  in  excess  of  the  amount  in  the  assurance  fund  of  the 
county  at  the  time.  If  there  is  not  enough  in  the  fund  to 
pay  the  claim,  the  unpaid  portion  bears  legal  interest  and  is 
paid  out  of  future  contributions  to  the  fund  as  fast  as  received. 
The  law  further  provides  that  there  shall  be  no  recovery  of 
an  amount  greater  than  the  fair  market  value  of  the  property 
at  the  time  the  right  of  action  accrued,  and  any  action  must  be 
begun  within  six  years  from  such  time. 

The  law  specifies  the  fees  that  may  be  charged.  The  official 
examiner  receives  1/10  of  one  percentum  (based  on  assessed 
value)  plus  $10.  There  is  the  contribution  to  the  assurance 
fund  of  1/10  of  one  per  centum.  The  other  fees  are  small. 
In  addition  to  them,  however,  the  applicant  has  to  pay  the 
cost  of  the  advertisement,  the  charge  for  the  survey  and  what- 
ever charges  his  own  attorney  may  make  for  his  services. 

The  form  of  certificate  of  title  is  prescribed  and  is  repro- 
duced in  the  appendix  (form  87). 

Arguments  in  favor  of  the  Torrens  system. — It  undoubted- 
ly seems  to  be  desirable  to  have  a  system  of  registration  which 
accurately  determines  the  ownership  of  a  piece  of  land  and 
all  liens  and  claims  upon  it,  records  or  registers  these  facts 
and  issues  a  certificate  of  registration  to  the  owner,  the  title 
registered  being  absolutely  conclusive  and  indefeasible  and  the 
results  being  obtained  speedily  and  cheaply.  This  is  what  the 
so-called  Torrens  system  is  designed  to  accomplish.  Some  of 
its  advantages,  as  suggested  by  those  who  favor  the  system, 
may  be  summarized  as  follows : — 

(a)  The  title  to  the  property  is  searched  once  for  all.  Dupli- 
cations of  searches  is  eliminated.    There  is  no  necessity  of  go- 
ing behind  the  registry  to  effect  transfers  after  the  first  registra- 
tion. 

(b)  Transfers,  after  the  initial  registration,  can  be  speedily 
accomplished.     Transactions  relating  to  registered  titles  can 
be  accomplished  in  a  day.    The  old  system  usually  took  weeks 
to  accomplish  the  same  thing.    The  original  registration,  how- 
ever, usually  takes  a  longer  time  than  a  title  company  examina- 
tion. 

(c)  Registration  makes  the  title  indefeasible.     There  is  no 
need  of  insurance  as  the  title  cannot  be  attacked.     Under  the 
old  system  of  title  insurance  the  title  company's  liability  is  lim- 
ited to  the  amount  of  the  policy  and  this  may  not  fully  protect 


THE  TORRENS  SYSTEM  209 

the  owner  if  there  is  an  increase  of  value  by  reason  of  improve- 
ments, or  for  any  other  cause. 

(d)  The  speed  and  safety  with  which  dealings  with  regis- 
tered titles  can  be  accomplished  should  make  land  titles  more 
marketable  and  land  consequently  a  more  liquid  asset.     There 
is  no  evidence  to  show  that  experience  with  the  law  in  any 
place  has  proven  this  to  be  so,  or  if  it  be  so,  that  it  has  in- 
creased  its  value  or  made  it  more  attractive  as  an  investment. 

(e)  The  expense  of  transferring  titles  to  land  and  of  secur- 
ing mortgages  on  it  is  reduced.    This  applies  more  to  transfers 
and  mortgages  of  titles  already  registered,  rather  than  to  the 
initial  registration,  although  some  state  that  registration  in  the 
first  instance  is  cheaper  than  title  examination  and  insurance. 

Objections  to  Torrens  system. — The  following  is  a  state- 
ment of  some  objections  that  have  been  made  to  the  system  in 
the  United  States : — 

(a)  There  can  be  no  true  Torrens  system  in  this  country 
because  any  law  making  a  registered  title  indefeasible  violates 
the  constitutional  guarantee  that  no  one  shall  be  deprived  of 
property  without  due  process  of  law.     Some  person  or  per- 
sons,   possibly  infants,    having  rights   in   the   property,   may, 
through  error  or  oversight,  not  be  named  in  the  action  to  regis- 
ter the  title,  and  may  not  receive  notice  of  it.     It  is  asserted 
that  the  omnibus  designation  "all  other  persons,  etc."  does  not 
remedy  this,  and  that  as  to  these  persons  there  has  not  been 
due  process  of  law.    It  must  be  remembered,  however,  that  any 
one  so  injured  will  be  compensated  from  the  assurance  fund, 
but  it  is  true  that  as  to  their  rights  in  the  property  itself,  they 
are  deprived  of  them.     Some  authorities  assert  that  the  ques- 
tion of  constitutionality  has  been  decided  by  the  United  States 
Supreme  Court  in  American  Land  Co.  vs.  Zeiss,  219  U.  S.  47. 

(b)  Under  the  provisions  of  the  law  the  initial  registration 
is  by  means  of  a  judicial  proceeding  resulting  in  an  order  or 
judgment  of  a  court,  but  the  law  permits  the  transfer  of  a  reg- 
istered title  to  be  made  by  a  registrar  or  other  public  official 
without  notice  to  anyone.     This  is  upon  the  assumption  that 
the  transfer  is  merely  the  performance  of  a  ministerial  act.  The 
question  has  been  raised  whether  such  official  not  being  clothed 
with  any  judicial  authority  is  not  in  reality  performing  a  judicial 
function  in  interpreting  an  instrument  and  passing  upon  its  suf- 
ficiency.    The  registration  of  the  title  in  the  name  of  the  new 
owner  is  conclusive  and  binding  upon  all  the  world.    Of  course, 


210    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

one  would  not  be  allowed  to  profit  by  his  fraud,  if  a  forgery  or 
other  fraud  had  been  committed,  but  the  registered  title  may 
again  be  transferred  and  one  taking  it  in  good  faith  would 
have  an  indefeasible  title.  In  cases  of  this  kind,  again,  injured 
parties  must  look  to  the  assurance  fund — they  cannot  recover 
their  property. 

(c)  Property  cannot  be  removed  from  the  system,  once  the 
title  has  been  registered.    No  matter  what  may  be  the  desires 
of  the  owner,  his  property  is  in  a  particular  class  and  must 
stay  there  forever.     It  prevents  the  sale  and  mortgaging  of 
the  property  to  those  who  will  not  deal  with   a   registered 
title. 

(d)  Upon  the  death  of  an  owner  of  registered  property 
a  petition  must  be  made  to  the  court  for  an  order  directing 
registration  of  the  title  in  the  heirs  and  devisees.     This  is  a 
proceeding  involving  some  legal  expense  and  is  in  addition 
to  the  proceedings  on  the  estate  in  the   Surrogate's  Court. 
Property  not  under   the   provisions   of   the    registration   act 
passes  at  death  directly  to  the  heirs  and  devisees.     Under 
the  Torrens  law  they  do  not  get  title  until,  as  a  result  of  the 
court's  order,  it  is  registered  in  their  names.     While  addi- 
tional expense  for  the  new  registration  may  be  small,  it  is 
avoided  when  the  title  is  insured  by  a  title  company  instead 
of  being  registered.     The  title  policy  protects  not  only  the 
insured,  but  also  his  heirs  and  devisees,  and  there  is  no  ex- 
pense  except  the  initial  premium.      Registered   property  is, 
of  course,  like  other  property  subject  to  the  lien  of  decedent's 
debts. 

(e)  Title    registration    is    neither    easy    nor    speedy.     It 
takes  the  form  of  an  action  at  law.    Not  only  is  the  title  exam- 
ined (in  practically  the  same  manner  as  a  title  company  exam- 
ination) but  in  addition  legal  proceedings  must  be  conducted. 
There  are  the  notices  to  be  given,  their  publication,  and  post- 
ing on  the  land,  in  addition  to  the  delays  caused  by  the  suc- 
cessive steps  in  the  Court  proceedings.     After  all,  the  regis- 
tration is  not  complete  and  conclusive  until  a  certain  period 
has  elapsed  (30  days  after  final  order  in  New  York).     Does 
this  indicate  that  the  system  has  both  ease  and  speed?   Surely 
not  on  the  initial  registration.     The  answer  of  course  is  that 
subsequent  transfers  can  be  accomplished. in  a  simple  manner 
and  without  delay.     This  may  be  true,  but  what  owner  wishes 
to  undertake  to  have  his  title  registered?     If  his  title  is  mar- 


THE  TORRENS  SYSTEM  211 

ketable,  he  can  sell  it  just  as  readily  (perhaps  more  so) 
unregistered  as  registered.  Registration  would  cost  him 
something  and  would  add  nothing  to  the  value  of  the  prop- 
erty. If  the  title  is  bad,  it  cannot  be  registered.  There  may 
be  a  few  questions  as  to  title  which  could  be  remedied  by  an 
action  under  the  Torrens  law,  but  the  same  thing  could  be 
accomplished  by  an  action  under  other  provisions  of  the  law. 

(f)  The  initial  registration  is  not  cheap.     There  are  the 
fees  for  the  examination  of  the  title  to  be  paid.    The  expense 
of  publication  of  the  notice,  filing  fees  and  other  incidental 
expenses,   the  contribution  to  the  assurance  fund,   and  then 
the  services  of  one's  own  attorney  to  be  paid  for. 

(g)  In  New  York,  the  county  is  not  in  back  of  the  assur- 
ance fund;  that  is  to  say  recovery  of  compensation  for  dam- 
ages is  limited  to  the  amount  in  the  fund,  although  future  con- 
tributions may  pay  the  claim  in  full  in  time.    There  have  been 
efforts  made  to  amend  the  law  so  as  to  make  the  county  liable 
for  claims  in  full  regardless  of  the  amount  in  the  assurance 
fund.    The  Attorney-General  of  the  State  rendered  an  opinion 
that  such  amendment  would  be  unconstitutional,  referring  to 
the   section    of   the    State    Constitution   which   prohibits   any 
county,  city,  town  or  village  incurring  indebtedness  except  for 
county,  city,  town  or  village  purposes.     On  the  other  hand, 
the  Hon.  Samuel  Seabury,  former  Judge  of  the  New  York 
Court  of  Appeals,   has  rendered  a  contrary  opinion.     It  is 
nevertheless  an  objection  to  the  registration  of  a  title,  or  of 
bringing  land  forever  under  the  registration  law,  that  those 
who  may  be  deprived  of  rights  in  the  land  by  error  or  omis- 
sion or  misconception  may  not  be  able  to  recover  compensa- 
tion except  after  an  indefinite  period.     If  the  system  once  got 
under  way  and  the  assurance  fund  grew  in  size  this  objection 
would  be  minimized. 

It  is  not  pretended  that  the  foregoing  are  all  of  the  objec- 
tions to  the  so-called  Torrens  system  of  land  registration. 
Those  given,  however,  indicate  to  some  extent  why  the  law 
in  New  York  State  has  not  been  more  successful.  New  York 
real  estate  owners  and  dealers  are  alive  and  receptive  to  good 
ideas,  but  they  are  not  using  the  Torrens  system.  While  there 
are  defects  in  the  old  system  of  title  examination  and  insur- 
ance it  evidently  possesses  more  attractions  for  New  Yorkers 
than  does  the  one  advocated  by  Torrens  law  adherents.  Per- 
haps this  is  partly  due  to  the  fact  that  title  insurance  has 


212    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

reached  a  higher  development  in  New  York  than  elsewhere 
and  partly  to  the  fact  that  a  model  Torrens  law  has  not  yet 
been  enacted.  The  sentiment  in  favor  of  the  Torrens  system 
may  increase  and  it  is  quite  possible  that  the  future  will  see  it 
in  general  use  throughout  the  country. 


APPENDICES 


No.  1 

NOTICE  OF  MECHANIC'S  LIEN— NEW  YORK 

NOTICE  UNDER  MECHANIC'S  LIEN  LAW 

To  Esquire, 

Clerk  of  the  and  all  others  to  whom  it  may  concern: 

PLEASE  TAKE  NOTICE,  That   ( 1.)    residing  at  in 

the and  residing  at   in  the   have 

and  claim  a  lien  for  the  principal  and  interest  of  the  price  and  value  of  the 
labor  and  material  hereinafter  mentioned,  upon  the  house,  building  and  appur- 
tenances, and  upon  the  lot,  premises  and  parcel  of  land  upon  which  the  same 
may  stand,  or  be  intended  to  stand,  hereinafter  mentioned,  pursuant  to  the 
provisions  of  an  Act  of  the  Legislature  of  the  State  of  New  York,  entitled  "An 
Act  in  relation  to  liens"  constituting  Chapter  Thirty-three  of  the  Consolidated 
Laws,  the  same  having  become  a  law  February  17,  1909,  and  being  Chapter 
Thirty-eight  of  the  Laws  of  1909,  and  acts  amendatory  thereof. 

(2.)  The  name  of  the  owner  of  the  real  property  against  whose  interest  therein 

a  lien  is  claimed  is and  the  interest  of  the  owner  as  far  as  known  to 

the   lienor  is    

(3.)  The  name  of  the  person  by  whom  the  lienor    was  employed  is 

The  name  of  the  person     to  whom  he  furnished  materials  is 

(4.)  The  labor  performed  was   

The  labor  to  be  performed  is 

The  material  furnished  was  

The  material  to  be  furnished  is   

The  agreed  price  and  value  of  said  labor  is  

The  agreed  price  and  value  of  said  material  is  

(5.)  The  amount  unpaid  to  the  lienor  for  such  labor  and  material  is 

(6.)  The  time  when  the  first  items  of  work  were  performed  was  

and  the  time  when  the  first  items  of  material  were  furnished  was  

The  time  when  the  last  items  of  work  were  performed  was 

and  the  time  when  the  last  items  of  material  were  furnished  was  

(7.)  The  property  to  be  charged  with  a  lien  is  described  as  follows: 


Dated  19 

COUNTY  OF ss.: being  duly  swoin,  says  that    he 

is   the  claimant  mentioned  in  the  foregoing  notice  of  lien,  that     he 

has  read  the  said  notice  and  knows  the  contents  thereof,  and  that  the  same  is 
true  of  h. .  own  knowledge,  except  as  to  the  matters  therein  stated  to  be  alleged 
on  information  and  belief  and  that  as  to  those  matters  he  believes  it  to  be  true. 

Sworn  before  me,  this 

day  of 19... 

215 


216    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  2 

CONDITIONAL  BILL  OF  SALE 

KNOW  ALL  MEN  BY  THESE  PRESENTS,  That  hereinafter 

designated  as  the  party  of  the  first  part,  for  and  in  consideration  of  the  sum  of 

($ )   Dollars,  lawful  money  of  the  United  States,  received 

by  the  party  of  the  first  part,  and  the  sum  of  ($ )   Dollars, 

to  be  paid  in  installments  as  is  evidenced  by  ( )   promissory 

notes,  more  particularly  hereinafter  set  forth,  the  receipt  of  the  above  is  hereby 
acknowledged,  do.,  hereby  conditionally  grant,  and  conditionally  bargain  and 

conditionally  sell  unto  of  hereinafter  designated  as  the 

party  of  the  second  part,  and  by  these  presents  do.,  conditionally  grant,  con- 
ditionally bargain  and  conditionally  sell  unto  the  said  party  of  the  second  part, 

executors,  administrators  and  assigns,  all  the  right,  title  and  interest  that 

the  party  of  the  first  part  ha . .   in  and  to  all    

also  the  good  will  of  the  said  business  and  the  lease  of  the  premises,  and  all 

other  chattels  and  fixtures  now  found  in  of  the  premises  now  known 

as  No all  of  which  chattels  and  fixtures  are  free  and  clear  from  any 

and  all  incumbrances. 

TO  HAVE  AND  TO  HOLD  and  singular  the  business,  stock,  goods,  chattels 
and  fixtures  above  conditionally  bargained,  conditionally  granted  or  intended 
so  to  be,  unto  the  said  party  of  the  second  part,  executors,  administrators  and 
assigns,  on  the  following  terms  and  conditions: 

THE  CONDITION  of  the  above  is  such:  That  if  the  said  party  of  the  second 
part  shall  and  do  well  and  truly  pay  unto  the  said  party  of  the  first  part,  or  to 

heirs,  executors,  administrators  or  assigns,  the  just,  true  and  full  sum 

of ($ )  Dollars,  lawful  money  of  the  United  States,  in  install- 
ments, and  which  sum  of ($ )  is  evidenced  by ( ) 

promissory  notes  each  bearing  even  date  herewith,  made  payable  in  the  sum  and 

manner  following:    The  first  note  of Dollars,  to  be  paid  on  the  ...... 

day  of  19....,  and  the  remaining   (••••)    notes,  monthly 

thereafter  until  all  shall  have  been  paid  for,  the  last  note  for  the  sum 

of ($ )  Dollars  is  to  be  due  and  payable  on  the day  of 

19...;  then  this  agreement  is  to  be  in  full  force  and  effect,  otherwise 

to  be  null,  void,  inoperative  and  without  any  effect. 

The  said  party  of  the  second  part,    heirs,  executors,   administrators 

or  assigns,  do  covenant  and  agree  to  and  with  the  said  party  of  the  first  part, 

heirs,  executors,  administrators  or  assigns,  that  in  the  event  default  be 

made  in  the  payment  of  any  of  the  installments  as  hereinbefore  mentioned,  that  it 
shall  be  lawful  for,  and  the  said  party  of  the  second  part  do. .  hereby  authorize 

and  empower  the  said  party  of  the  first  part, executors,  administrators,  or 

assigns,  to  enter  any  dwelling  house,  store  or  other  premises  where  the  said  goods 
and  chattels  are,  or  may  be  found,  and  to  take  and  carry  away  said  goods  and 
chattels  and  to  sell  and  dispose  of  them  at  public  or  private  sale  for  the  best 
price  that  the  said  party  of  the  first  part  can  obtain,  and  out  of  the  proceeds 
of  the  said  sale,  retain  the  amount  remaining  unpaid,  together  with  any  and 
all  charges  and  expenses  that  may  be  incurred  by  the  said  party  of  the  first  part, 

rendering  the  surplus  (if  any)  unto  the  said  party  of  the  second  part  or  to 

executors,  administrators  or  assigns. 

The  party  of  the  second  part  do.,  hereby  agree  to  and  with  the  party  of 

the  first  part,  or heirs,  executors,  administrators  or  assigns,  that  in  the 

event  default  be  made  in  the  payment  of  any  of  the  installments  as  the  same 
become  due,  that  the  amount  remaining  unpaid  shall  then,  at  the  option  of  the 
said  party  of  the  first  part,  become  immediately  due  and  payable  after  such 


APPENDIX  217 

default;  it  being  understood  and  agreed  between  the  parties  hereto  that  the 
lease  of  the  store  aforesaid,  and  the  good  will,  and  the  right,  title  and  interest 
in  and  to  the  stock,  merchandise,  and  fixtures  of  said  business  shall  in  no  event 
pass  unto  the  said  party  of  the  second  part  until  the  said  party  of  the  second 
part  ha. .  fully  complied  with  all  the  conditions  herein,  and  ha. .  made  the  pay- 
ments mentioned  herein,  and  in  accordance  with  the  terms  of  this  agreement, 
this  being  a  condition  precedent  before  the  title  to  these  premises  shall  pass 
from  the  party  of  the  first  part  to  the  party  of  the  second  part. 

The  party  of  the  first  part,  in  consideration  of  the  party  of  the  second  part 
fully  complying  with  the  terms  aforesaid,  agree.,  to  and  with  the  party  of  the 

second  part,  or heirs,  executors,  administrators  or  assigns,  that  the  party 

of  the  first  part  will  not  engage  in  a  business  similar  to  the  one  mentioned  in 
this  agreement,  either  directly  or  indirectly,  as  principal,  agent,  servant  or  em- 
ployee, or  act  for  any  other  person,  firm  or  corporation  whatsoever  for  a  period 

of  ( )  years  from  the  date  hereof,  and  not  within  a  radius  of 

(••••)  square  blocks  from  the  premises  aforesaid. 

The  party  of  the  second  part  also  agree.,  to  keep  said  business  fully  insured 

against  loss  or  damage  by  fire  for  the  benefit  of  the  party  of  the  first  part 

heirs,  executors,  administrators  or  assigns,  in  a  sum  not  less  than  

($ )  Dollars,  and  if  the  party  of  the  second  part  fail  to  procure  or  ef- 
fect such  insurance  within  Ten  (10)  days  from  date  hereof,  the  party  of  the 
first  part  may  effect  such  insurance  and  charge  the  cost  thereof  to  the  said 
party  of  the  second  part,  and  which  charge  the  said  party  of  the  second  part 
agree. .  to  pay  on  demand,  or  upon  the  failure  or  refusal  of  the  said  party  of 
the  second  part  to  pay  said  premium,  then  the  party  of  the  first  part  may,  at. ... 
option,  take  immediate  possession  of  the  said  business,  anything  herein  contained 
to  the  contrary  notwithstanding. 

The  said  party  of  the  second  part  in  consideration  of  the  above  agree.,  to 
keep,  during  the  continuance  of  this  agreement,  stock  in  a  sum  not  less  than 
the  amount  of  stock  now  contained  in  the  aforesaid  premises,  the  value  thereof 

to  be  not  less  than ($ )  Dollars,  and  in  the  event  that  the  party 

of  the  second  part  fail.,  to  comply  therewith,  the  balance  remaining  unpaid 
shall  then,  at  the  option  of  the  party  of  the  first  part,  become  due  and  payable, 
and  the  possession  of  the  business  herein  mentioned  is  to  revert  back  to  the  party 
of  the  first  part,  and  the  party  of  the  second  part  agree  that  the  said  party  of 
the  first  part  may  maintain  an  action  to  eject  the  said  party  of  the  second  part 
as  trespasser  on  said  premises. 

The  party  of  the  second  part  in  consideration  of  the  sum  of  one  dollar  to 

in  hand  paid  by  the  party  of  the  first  part,  the  receipt  whereof  is  hereby 

acknowledged,  hereby  agree.,  to  and  with  the  party  of  the  first  part,  

heirs,  executors,  administrators  and  assigns,  that  in  the  event  the  party  of  the 
second  part  fail.,  to  comply  with  any  and  all  the  terms  and  conditions  of  this 
agreement,  or  in  the  event  the  party  of  the  second  part  fail.,  to  pay  any  and 
all  of  the  installments  at  the  time  and  in  the  manner  hereinbefore  mentioned, 

then  the  party  of  the  second  part  authorize.,  the  party  of  the  first  part,  

heirs,  executors,  administrators  or  assigns,  to  re-take  possession  of  said  business, 
stock,  chattels,  fixtures,  and  the  good  will  thereof,  and  any  sum  of  money  paid 

hereunder  shall  belong  to  the  party  of  the  first  part,  heirs,  executors, 

administrators  or  assigns,  as  liquidated,  fixed  and  stipulated  damages,  and  not 
as  a  penalty  because  the  parties  herein  cannot  ascertain  the  exact  amount  of 
damages  sustained  by  the  said  party  of  the  first  part  for  a  breach  of  the  con- 
ditions of  this  agreement  by  the  party  of  the  second  part,  and  the  said  party 

of  the  second  part  agree.,  to  and  with  the  said  party  of  the  first  part,  

heirs,  executors,  administrators  or  assigns,  in  the  event  said  party  of  the  second 
part  shall  default  in  the  payment  of  the  installments  hereinbefore  mentioned,  or 


218    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

in  the  event  the  party  of  the  second  part  fail  to  comply  with  any  and  all  the 
terms  and  conditions  of  this  agreement,  that  the  said  party  of  the  second  part 
will  not  engage  in  a  business  similar  to  the  one  mentioned  in  this  agreement, 
either  directly  or  indirectly,  as  principal,  agent,  servant,  or  employee,  for  any 
person,  firm  or  corporation  whatsoever,  neither  will  the  said  party  of  the 
second  part  establish  a  business  of  a  like  nature,  nor  cause  the  same  to  be 

established,  for  a  period  of  (••••)  years  from  date  hereof,  within  a 

radius  of ( )  square  blocks  from  the  aforesaid  premises,  and  the 

parties  hereto  agree  that  in  the  event  of  a  breach  of  the  aforementioned  con- 
dition, the  said  party  of  the  first  part  will  be  entitled  to  an  injunction  restrain- 
ing the  said  party  of  the  second  part  for  violating  the  terms  of  the  agreement 
hereinbefore  mentioned. 

IT  IS  ALSO  UNDERSTOOD  between  the  parties  hereto,  that  upon  full  com- 
pliance by  the  party  of  the  second  part  of  all  the  terms,  covenants  and  condi- 
tions herein  contained,  that  the  party  of  the  second  part  is  to  have,  hold  and 

enjoy  the  above  business  unto heirs,  executors,  administrators  and  assigns 

forever. 

IN  WITNESS  WHEREOF,  the  parties  hereto  have  hereunto  set  their  hands 

and  seals  this day  of one  thousand  nine  hundred  and 

(19....). 

In  presence  of, 


SCHEDULE  OF  THE  FOREGOING  CONDITIONAL  BILL  OF  SALE: 


STATE  OF 

CITY  OF 

COUNTY  OF ss.: 


being  duly  sworn,  depose.,  and  say..,  that  ..he  reside.,  at 

in  the  Borough  of ,  in  the  City  of 

That the  same  person.,  who  executed  the  within  conditional  bill  of 

sale. 

That the  sole  and  absolute  owner.,  of  the  property  described  in  said 

conditional  bill  of  sale  and  has  full  right  to  dispose  of  same. 

That  the  said  property,  and  each  and  every  part  thereof,  is  free  and  clear 
of  any  liens,  mortgages,  debts  or  other  incumbrances  of  whatsoever  kind  or 
nature. 

That  the  just,  true,  full  and  lawful  sum  due  on  this  conditional  bill  of  sale 

is  ($ )  Dollars,  and  is  to  be  paid  in  installments  as  mentioned 

and  described  therein;  that  ..he read  the  foregoing  conditional  bill  of 

sale  and  know.,  the  contents  thereof. 

That  this  affidavit  is  made  for  the  purpose  and  with  the  intent  of  inducing 

to  purchase  the  property  described  in  said  conditional  bill  of  sale, 

knowing  that  ..he.,  will  rely  thereon  and  pay  a  good  and  valuable  considera- 
tion therefor. 

Sworn  to  before  me,  this 
day  of 19... 


APPENDIX  219 

No.  3 

CHATTEL  MORTGAGE 

KNOW  ALL  MEN  BY  THESE  PRESENTS,  THAT of  the  first 

part,  for  securing  the  payment  of  the  indebtedness  hereinafter  mentioned,  and  in 

consideration  of  the  sum  of  one  dollar  to duly  paid  by of  the 

second  part,  at  or  before  the  ensealing  and  delivery  of  these  presents,  the 
receipt  whereof  is  hereby  acknowledged,  have  bargained  and  sold,  and  by  these 
presents  do.,  grant,  bargain  and  sell  unto  the  said  part.,  of  the  second  part 
and  all  other  goods  and  chattels  mentioned  in  the  schedule  here- 
unto annexed,  and  now  in  the TO  HAVE  AND  TO  HOLD  all  and 

singular,  the  goods  and  chattels  above  bargained  and  sold,  or  intended  so  to 
be,  unto  the  said  part. .  of  the  second  part,  his  executors,  administra- 
tors and  assigns  forever.  AND  the  said  part.,  of  the  first  part,  for 

heirs,  executors  and  administrators,  all  and  singular  of  the  said  goods 

and  chattels  above  bargained  and  sold  unto  the  said  part.,  of  the  second  part, 

heirs,  executors,  administrators  and  assigns,  against   the  said 

part. .  of  the  first  part,  and  against  all  and  every  person  or  persons  whomso- 
ever, shall  and  will  warrant  and  forever  defend.  UPON  CONDITION,  that 

if  the  said  part. .  of  the  first  part,  shall  and  do  well  and  truly  pay 

unto  the  said  part.,  of  the  second  part, his  executors,  administrators  or 

assigns,  


then  these  presents  shall  be  void.  AND  the  said  part.,  of  the  first 

part,  for  executors,  administrators  and  assigns,  do.,  covenant  and 

agree,  to  and  with  the  said  part.,  of  the  second  part, executors,  admin- 
istrators and  assigns,  that  in  case  default  shall  be  made  in  the  payment  of  the 

said  sum  above  mentioned,  then  it  shall  and  may  be  lawful  for,  and  

the  said  part.,  of  the  first  part,  do.,  hereby  authorize  and  empower  the  said 

part.,  of  the  second  part,  executors,  administrators  or  assigns,  with  the 

aid  and  assistance  of  any  person  or  persons,  to  enter  dwelling  house, 

store  and  other  premises,  and  such  other  place  or  places  as  the  said  goods  or 
chattels  are  or  may  be  placed,  and  take  and  carry  away  the  said  goods  or 
chattels,  and  to  sell  and  dispose  of  the  same  for  the  best  price  they  can  obtain, 
and  out  of  the  money  arising  therefrom,  to  retain  and  pay  the  said  sum  above 
mentioned,  and  all  charges  touching  the  same,  rendering  the  overplus  (if  any) 
unto  or  to executors,  administrators  or  assigns. 

AND  until  default  be  made  in  the  payment  of  the  said  sum  of  money 

to  remain  and  continue  in  the  quiet  and  peaceable  possession  of  the  said  goods 
and  chattels,  and  the  full  and  free  enjoyment  of  the  same. 

IN  WITNESS  WHEREOF the  said  part.,  of  the  first  part,  ha.. 

hereunto  set hand . .  and  seal . .  the day  of one  thousand 

nine  hundred 


Sealed  and  delivered  in  the  presence  of 
SCHEDULE  REFERRED  TO  IN  THE  FOREGOING  MORTGAGE: 

(ACKNOWLEDGMENT) 


220    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  4 

FACTS  TO  ASCERTAIN  BEFORE  DRAWING 
CONTRACT  OF  SALE 

1.  Date  of  contract. 

2.  Name  and  address  of  seller. 

3.  Is  seller  a  citizen,  of  full  age,  and  competent? 

4.  Name  of  seller's  wife  and  is  she  of  full  age. 

5.  Name  and  residence  of  purchaser. 

6.  Description  of  the  property. 

7.  The  purchase  price. 

(a)  Amount  to  be  paid  on  signing  contract. 

(b)  Amount  to  be  paid  on  delivery  of  deed. 

(c)  Existing  mortgage  or  mortgages  and  details  thereof. 

(d)  Purchase  money  mortgage,  if  any,  and  details  thereof. 

8.  What  kind  of  deed  is  to  be  delivered,  i.  e.,  full  covenant,  quit  claim  or 
bargain  and  sale? 

9.  What  agreement  has  been  made  with   reference  to  any  specific  personal 
property,  i.  e.,  gas  ranges,  heaters,  machinery,  partitions,  fixtures,  coal,  wood, 
window  shades,  screens,  carpets,  rugs,  hangings,  etc.  ? 

10.  Is  purchaser  to  assume  the  mortgage  or  take  the  property  subject  to  it? 

11.  Are  any  exceptions  or  reservations  to  be  inserted? 

12.  Are  any  special  clauses  to  be  inserted? 

13.  Stipulations   and   agreements  with  reference   to   tenancies   and   rights  of 
persons  in  possession. 

14.  Stipulations  and  agreements,  if  any,  to  be  inserted  with  reference  to  the 
state  of  facts  a  survey  would  show,  i.   e.,   party  walls,  encroachments,   ease- 
ments, etc. 

15.  What  items  are  to  be  adjusted  on  the  closing  of  title? 

16.  Name  of  the  broker  who  brought  about  the  sale,  his  address,  the  amount 
of  his  commission  and  who  is  to  pay  it  and  whether  or  not  a  clause  covering 
the  foregoing  facts  is  to  be  inserted  in  the  contract. 

17.  Are  any  alterations  or  changes  being  made  or  have  they  been  made  in 
street  lines,  name  or  grade? 

18.  Are  condemnation  or  assessment  proceedings  contemplated  or  pending  or 
has  an  award  been  made? 

19.  Who  is  to  draw  the  purchase  money  mortgage   and  who  is  to  pay  the 
expense  thereof? 

20.  Are  there  any  covenants,  restrictions  and  consents  affecting  the  title? 

21.  What  stipulation  of  agreement  is  to  be  made  with  reference  to  Tenement 
House,  Health,  Fire  and  Building  Department  and  other  violations? 

22.  The  place  and  date  on  which  the  title  is  to  be  closed. 

23.  Is  time  to  be  the  essence  of  the  contract? 

24.  Are  any  alterations  to  be  made  in  the  premises  between  the  date  of  the 
contract  and  the  date  of  closing? 


No.  5 

CONTRACT  OF  SALE— CALIFORNIA 

KNOW  ALL  MEN  BY  THESE  PRESENTS,  That  this  Agreement,  made  and 

entered  into  on  this   day  of  in  the  year  19...  by  and  between 

hereinafter  known  as  "the  seller.."  and   herein- 
after known  as  "the  purchaser.  ." 


APPENDIX  221 

WITNESSETH:    That  in  consideration  of  the  payment  of  the  sum  of 

Dollars,  the  receipt  of  which  is  hereby  acknowledged,  and  the  payment  of  the 
additional  sum  of  Dollars,  in  United  States  gold  coin  by  the  pur- 
chaser., to  the  seller.,  as  hereinafter  stipulated  and  agreed  to  be  paid,  with 
the  interest  thereon,  the  seller.,  agree.,  to  sell  to  the  purchaser.,  all  that  real 

property,  situate,  lying  and  being  in  the County  of  Sacramento  in  the 

State  of  California,  known,  designated  and  described  as  follows,  to  wit: 


Together  with  the  improvements  and  the  hereditaments  and  the  appurtenances 
thereunto  belonging  or  in  any  wise  appertaining.  And  the  purchaser..,  in  con- 
sideration of  the  premises,  hereby  agree. .  to  purchase  the  hereinbefore  described 
real  property,  and  pay  therefor  to  the  seller.,  or  said  seller.,  heirs,  adminis- 
trators, successors  or  assigns,  in  addition  to  the  amount  already  paid,  the  addi- 
tional sum  of Dollars,  in  United  States  gold  coin,  as  follows,  to  wit: 

The  sum  of  Dollars,  on  the day  of  each  and  every  month, 

commencing  with  the day  of 19 for  a  period  not  to  exceed 

months   from  date   hereof,   provided,   however,   that   the  purchaser.. 

may  make  larger  payments  at  any  time. 


Together  with  interest  thereon  from  this  date  until  paid,  at  the  rate  of 

per  cent  per  annum,  payable  monthly,  in  like  gold  coin.  But  if  not  paid  when 
due,  it  shall  draw  interest  at  the  rate  of  twelve  per  cent  per  annum  until  paid. 
And  it  is  further  agreed  that  in  case  of  a  default  in  the  payment  of  any  of 
said  sums,  or  any  installments  or  interest  due  thereon,  for  the  period  of  two 
months  after  they  become  due,  that  all  money  previously  paid  by  the  purchaser. . 
shall,  at  the  option  of  the  seller..,  become  forfeited  to  the  seller.,  and  re- 
tained as  settled  and  liquidated  damages;  the  parties  hereto  agreeing  that  it 
is  impossible  to  estimate  the  actual  damages,  and  thereupon  the  seller.,  shall 
be  released  from  all  obligations  in  law  and  equity  to  convey  said  real  property, 
and  the  purchaser.,  shall  forfeit  all  right  thereto,  and  shall  immediately  de- 
liver the  possession  of  it  to  the  seller..;  and  herein  it  is  agreed  that  time  is 
the  essence  of  this  contract.  And  it  is  further  agreed  that  the  purchaser. .  shall 
keep  the  improvements  on  said  premises  insured  for  three-fourths  of  their  cash 
value,  in  the  name  and  for  the  benefit  of  the  seller..,  in  a  company  previously 
approved  by  the  seller..  ;  and  in  event  of  said  purchaser.,  failing  to  keep  said 
improvements  insured  as  aforesaid,  then  the  seller. .  may  cause  them  to  be 
insured  at  the  expense  of  the  purchaser...  All  improvements,  buildings  and 
structures  now  upon  said  lot  of  land  hereinbefore  described,  or  that  may  here- 
after be  placed  or  built  thereon,  shall  belong  to  said  seller.,  until  the  deed  is 
made  to  the  purchaser.  Said  purchaser. .  shall  not  have  the  right  to  sell,  move 
or  incumber  the  same  until  the  execution  of  the  deed. 

And  the  purchaser.,  is  entitled  to  the  possession  of  said  premises,  and  may 
so  continue,  unless  forfeited  by  the  non-payment  of  the  purchase  money  or  any 
installments  thereof,  or  interest  or  other  payments  as  herein  stipulated.  And 
in  consideration  of  the  purchaser. .  having  the  possession  and  occupancy  of  said 
real  estate,  said  purchaser.,  shall  pay,  in  addition  to  the  purchase  money  and 
insurance  all  taxes  and  assessments  being  a  lien  against  it  on  and  after  the  first 
Monday  in  March,  19. ... 

And  if  the  purchaser. .  should  fail  to  pay  any  taxes  or  assessments,  as  herein 
specified,  the  seller.,  may  pay  them,  and  all  moneys  so  paid  shall  become  a 
debt  against  the  purchaser. .,  and  the  purchaser. .  will  on  demand,  repay  to  the 


222    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

seller..,  in  gold  coin,  all  moneys  paid  by  the  seller.,  for  any  taxes  or  assess- 
ments of  any  kind,  or  to  obtain  any  insurance,  with  interest  thereon  from  date 
of  payment  until  repaid,  at  the  rate  of  twelve  per  cent  per  annum,  and  said 
payments  shall  be  secured  by  this  contract. 

And  the  seller.,  on  receiving  the  full  payment  of  all  the  purchase  money, 
and  interest  thereon,  and  all  advances  made  by  said  seller.,  for  taxes,  insur- 
ance or  otherwise,  with  interest  as  herein  agreed  to  be  paid,  agrees  that 

will  convey  all  said  real  property  by  deed  to  the  purchaser.,  by  perfect  title, 
free  from  all  incumbrances  except  such  liens  or  incumbrances  as  may  be  caused 
by  the  acts  or  negligence  of  the  purchaser..,  and  taxes  and  assessments  that 
became  a  lien  as  hereinbefore  stated. 


And  it  is  further  agreed  and  understood  that  this  contract  is  to  apply  to  and 
bind  the  heirs,  administrators,  successors  and  assigns  of  the  respective  parties 
hereto. 

IN  WITNESS  WHEREOF,  We,  the  said  parties,  have  hereunto  set  our 
hands  and  seals  the  day  and  year  in  this  instrument  first  above  written. 

[L.S.] 

[L.S.] 

[L.S.] 

[L.S.] 


No.  6 

CONTRACT  OF  SALE— PENNSYLVANIA 

Adopted  for  and  by  the  Members  of  the  Philadelphia  Real  Estate  Board 

AGREEMENT,  made  this day  of A.  D.  19. ...  WITNESS- 

ETH,  That Agent  for hereby  agrees  to  sell  to 

who  agrees  to  buy  premises for  the  sum  of 

Dollars,  TERMS  as  follows:  Cash  at  signing  this  Agreement 

$ Cash  at  settlement  $ First  Mortgage  $ Second  Mort- 
gage $ 

Total    $ 

Premises  to  be  conveyed  clear  of  all  liens  and  incumbrances,  excepting  exist- 
ing restrictions  and  easements,  if  any 

FIRE  INSURANCE  POLICIES  (if  accompanying  existing  mortgage..),  to 
be  purchased  by  buyer  at  cancellation  value,  if  perpetual,  and  pro  rata  value, 
if  term  insurance. 

TITLE  is  to  be  good  and  marketable  and  such  as  will  be  insured  at  regular 
rates  by  any  responsible  Title  Insurance  Company;  otherwise  the  buyer  shall 
be  repaid  his  deposit  money  paid  on  account  and  shall  also  be  reimbursed  for 
the  cash  outlay  which  he  may  have  been  put  to  for  Title  Insurance  and  drawing 
papers. 


Gas  and  electric  fixtures,  heating  and  plumbing  systems,  ranges  and  laundry 
tubs  annexed  to  said  Buildings  are included  in  this  sale. 

POSSESSION  to   be  delivered    

TAXES,  Water  Rent,  House  Rent,  Interest  on  incumbrances  and  Ground 
Rent  (if  any)  are  to  be  apportioned  to  date  of  settlement. 

SETTLEMENT  to  be  made  on  or  before   .  .   and  said  time  is 


APPENDIX  223 

hereby  agreed  to  be  the  essence  of  this  agreement.  Should  the  buyer  fail  to 
make  settlement  as  herein  provided,  the  sum  or  sums  paid  on  account  are  to  be 
retained  by  the  seller,  either  on  account  of  the  purchase  money,  or  as  compen- 
sation for  the  damages  and  expenses  he  has  been  put  to  in  this  behalf,  as  the 
seller  shall  elect,  and  in  the  latter  case  this  contract  shall  become  null  and 
void  and  all  copies  to  be  returned  to  seller  for  cancellation. 

This  agreement  not  to  be  lodged  in  any  public  office  for  record. 

Formal  tender  of  deed  and  tender  of  moneys  is  hereby  waived. 

If  a  mortgage  is  given  for  any  part  of  the  purchase  money,  buyer  will  have 
insured  the  title  of  said  mortgage  and  will  give  buyer's  purchase  money  bond 

mortgage,  form  and  condition  of  which  are  to  be  approved  by  

same  also  to  be  accompanied  by  satisfactory  Fire  Insurance. 

It  is  understood  that  is  acting  as  Agent  only  and  will  in  no 

case  whatsoever  be  held  liable  to  either  party  for  the  performance  of  any  term 
or  covenant  of  this  agreement,  or  for  damages  for  non-performance  thereof. 

It  is  understood  that  this  sale  is  made  subject  to  the  written  approval  of  the 
owner,  which  must  be  obtained  within days. 

This  agreement  to  extend  to  and  be  binding  upon  the  heirs,  executors,  admin- 
istrators and  assigns  of  the  parties  hereto. 

IN  WITNESS  WHEREOF  the  said  parties  have  hereunto  set  their  hands 
and  seals  the  day  and  year  first  above  written. 

SEALED  AND  DELIVERED  [L.  S.] 

in  the  presence  of  Agent  for 

[L.S.] 

[L.S.] 

[L.S.] 

hereby  approve  the  above  contract 19.... 

[L.S.] 

[L.S.] 

Received  the  day  of  the  date  of  the  within  agreement,  Dollars, 

on  account  of  the  purchase  money  named  therein. 


Agent,  for 


No.  7 

OPTION  TO   PURCHASE— MASSACHUSETTS 

KNOW  ALL  MEN  BY  THESE  PRESENTS  that  . 


......  . . , 

the  party  of  the  first  part,  in  consideration  of dollars  paid  by 

,  the  party  of  the  second  part,  the  receipt  whereof  is  hereby  acknowl- 
edged, hereby  for  myself,  my  heirs,  executors  and  administrators,  agree  to  sell 
and  convey  to  the  said  party  of  the  second  part,  or  his  assigns,  the  following 
described  property  for  the  following  consideration:  The  property  consists  of 


The  consideration  to  be  paid  by  said  party  of  the  second  part,  or  his  assigns, 

shall  be  dollars.     This  option  may  be  accepted  by  the  said  party  of 

the  second  part,  or  his  assigns,  within    days  from  the  date  of  this 

instrument,  and  said  conveyance  shall  be  made  within days  after  such 

acceptance,  by  a  warranty  deed,  with  full  covenants  and  dower  or 


224   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

curtesy  release  if  necessary,  conveying  a  clear  title  free  from  all  incumbrances, 

said  party  of  the  second  part,  or  his  assigns,  giving  to  

said  party  of  the  first  part,  days'  notice  in  writing  of  the  time  and 

place  where  said  conveyance  shall  be  made  and  executed. 

AND  IT  IS  AGREED  that  if  the  said  party  of  the  second  part,  or  his  assigns, 
shall  fail  to  accept  this  option,  or  shall,  after  the  acceptance  of  this  option,  fail 

to  pay  the  said  sum  of dollars  the  consideration  stated  above,  at  the 

time  and  place  agreed  upon  and  in  accordance  with  the  conditions  as  herein- 
before stated,  he,  the  said  party  of  the  second  part,  or  his  assigns,  shall  for- 
feit any  and  all  sums  paid  to  the  party  of  the  first  part,  as  hereinbefore  stated. 

IN  WITNESS  WHEREOF,  the  said  party  of  the  first  part  hereto  sets  h... 

hand  and  seal  this day  of in  the  year  one  thousand  nine  hundred 

and 

Signed  and  sealed  in  presence  of 


No.  8 

CONTRACT  OF  SALE— MASSACHUSETTS 

AGREEMENT  made  this  day  of  A.  D.  19 between 

of  the  first  part,  and of  the  second  part. 

The  party  of  the  first  part  hereby  agrees  to  SELL,  and  the  party  of  the 

second  part  to  PURCHAbJi,  a  certain  estate  situated 

and  bounded  and  described  as  follows:  . 


Said  premises  are  to  be  conveyed  on  or  before  by  a  good  and 

sufficient deed  of  the  party  of  the  first  part,  conveying  a  good  and 

clear  title  to  the  same,  free  from  all  incumbrances 

and  for  such  deed  and  conveyance  the  party  of  the  second  part  is  to  pay  the 

sum  of dollars,  of  which dollars  have  been  paid  this 

day dollars  are  to  be  paid  in  cash  upon  the  delivery  of  said  deed, 

and  the  remainder  is  to  be  paid  by  the  note  of  the  party  of  the  second  part, 

dated bearing  interest per  cent  per  annum,  payable  semi- 

annually,  and  secured  by  a  power  of  sale  mortgage,  in  the  usual  form,  upon 
the  said  premises,  such  note  to  be  payable  

Full  possession  of  the  said  premises,  free  of  all  tenants  is  to  be 

delivered  to  the  party  of  the  second  part  at  the  time  of  the  delivery  of  the  deed, 
the  said  premises  to  be  then  in  the  same  condition  in  which  they  now  are, 
reasonable  use  and  wear  of  the  buildings  thereon,  and  damage  by  fire  or 
other  unavoidable  casualty  excepted. 

The  buildings  on  said  premises  shall,  until  the  full  performance  of  this 

agreement,  be  kept  insured  in  the  sum  of dollars  by  the  party  of  the 

first  part,  in  offices  satisfactory  to  the  party  of  the  second  part,  and,  in  case  of 
any  loss,  all  sums  recovered  or  recoverable  on  account  of  said  insurance  shall 
be  paid  over  or  assigned,  on  delivery  of  the  deed,  to  the'  party  of  the  second 
part,  unless  the  premises  shall  previously  have  been  restored  to  their  former 
condition  by  the  party  of  the  first  part. 


APPENDIX  225 

Rents  shall  be  apportioned  as  of  the  day  of  the  delivery  of  the  deed,  and  the 
taxes  assessed  for  the  year  19. ..  shall  be  paid  by 

The  deed  is  to  be  delivered  and  the  consideration  paid,  if  the  purchaser  so 
requires,  at  the  Registry  of  Deeds  in  which  the  deed  should  by  law  be  recorded. 

If  the  party  of  the  first  part  shall  be  unable  to  gr  e  title  or  to  make  convey- 
ance as  above  stipulated,  any  payments  made  under  this  agreement  shall  be 
refunded,  and  all  other  obligations  of  either  party  hereunto  shall  cease,  but 
the  acceptance  of  a  deed  and  possession  by  the  party  of  the  second  part  shall 
be  deemed  to  be  a  full  performance  and  discharge  hereof. 

In  consideration  of  the  above, ,  wife  of  the  said ,  hereby 

agrees  to  join  in  the  deed  to  be  made  as  aforesaid,  and  to  release  to  the  party 
of  the  second  part  all  right  of  dower  and  homestead  in  the  said  premises. 

It  is  understood  that  a  broker's  commission  of  per  cent  on  the  said 

sale  is  to  be  paid  to by  the  said  party  of  the  first  part. 

IN  WITNESS  WHEREOF  the  said  parties  hereto,  and  to  another  instrument 
of  like  tenor,  set  their  hands  and  seals  on  the  day  and  year  first  above  written. 

Signed  and  sealed  in  presence  of 


EXTENSION 
The  time  for  the  performance  of  the  foregoing  agreement  is  extended  until 


Witness  our  hands  and  seals  this  day  of 19 


No.  9 

SALE  CONTRACT— OHIO 

COLUMBUS,  OHIO, 19. . . . 

I  hereby  propose  and  agree  to  SELL  real  estate  described  as  follows,  to  wit: 

at  a  consideration  price  of on  the  following  terms : 


Possession 

DEFERRED  PAYMENTS  to  be  secured  by  mortgage  on  premises  conveyed, 

interest  at  per  cent  per  annum,  payable  annually.  Mortgage 

to  contain  30-day  default  of  interest  clause  and  provision  for  $ fire 

insurance  assigned. 

ABSTRACT:  Grantor  to  furnish  complete  Abstract  of  Title  to piece 

of  property  conveyed,  showing  good  title  in  present  owner,  and  free  and  clear 
of  all  encumbrances  except  as  herein  stated. 

TAXES:  Grantor  to  pay  all  taxes  to  and  including  the  19 

payment.  Grantee  to  assume  all  falling  due  and  payable  after  said  date. 


226   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

STREET  ASSESSMENTS:    Grantor  to  pay   

Grantee  to  assume  

All  meters,  lighting  fixtures,  fly  screens,  shades  and  awnings,  belonging  to 
the  Grantor  now  in  said  premises,  to  go  to  the  Grantee  without  extra  charge. 
Rentals  and  interest  to  be  adjusted  to  date  of  delivery  of  Deed.  Insurance 
policies  to  be  adjusted  to  date  of  delivery  of  Deed  and  paid  for  by  Grantee 
for  unexpired  term  of  said  policies.. 

Sale  to  be  closed  within  days  after  acceptance  hereof,  or  as  soon 

thereafter  as  possible. 

I  agree  to  pay  your  firm  your  regular  commission  of  for  having 

secured  the  herein  purchaser  for  my  property.  Should  I  fail  within  reasonable 
time  to  fulfil  the  above  conditions,  or  any  accepted  modification  thereof,  after 
you  secure  acceptance  thereof,  I  agree  to  pay  said  commission. 

This  proposition  is  open  for  acceptance  to  and  including  

REMARKS: 


I  hereby  accept  the  above  proposition  this  day  of 19. . ., 

and  deposit  with  your  firm  $ to  be  held  in  trust  by  you  on  account  of 

this  contract,   until   the   same  is  consummated.     If  the   Grantor  fails  to  fulfil 

part  of  the  contract  the  said  deposit  is  to  be  returned  to  me.     If  I 

fail  within  a  reasonable  time  to  fulfil  my  part  of  the  contract  I  agree  to  pay 
your  firm  your  regular  commission,  


No.  10 

CONTRACT  OF  SALE— ILLINOIS 

THIS    MEMORANDUM    WITNESSETH,    THAT hereby    agree 

to  purchase  at  the  price  of   Dollars,  the  following  described   real 

estate,  situated  in  the  County  of and  State  of  Illinois: 


Section Township North,  Range East  of  the  Third 

Principal  Meridian,   and agrees  to  sell  said  premises   at  said  price, 

and  to  convey  to  said  purchaser   a   good   and   merchantable  title   thereto,   by 

general  Warranty  Deed,  but  subject  to:  (1)   existing  leases  expiring 

the  purchaser  to  be  entitled  to  the  rents  from ;    (2)    all  taxes   and 

assessments  levied  after  the  year  19 ;     (3)   any  unpaid  special  taxes  or 

assessments  levied  for  improvements  not  yet  made,  also  subject  to 


Said  purchaser  has  paid Dollars,  as  earnest  money, 

to  be  applied  on  such  purchase  when  consummated,  and  agrees  to  pay  within 
five  days  after  the  title  has  been  examined  and  found  good,  or  accepted  by 
him,  the  further  sum  of Dollars,  at  the  office  of 


APPENDIX  227 

provided  a  good  and  sufficient  general  Warranty  Deed,  conveying  to  said  pur- 
chaser a  good  and  merchantable  title  to  said  premises  (subject  as  aforesaid), 
shall  then  be  ready  for  delivery.  The  balance  to  be  paid  as  follows: 


with  interest  from  the  date  hereof  at  the  rate  of per  cent  per  annum, 

payable  semi-annually,  to  be  secured  by  the  purchaser's  notes  and  mortgage, 
or  trust  deed,  of  even  date  herewith,  on  said  premises,  in  the  form  known  as 
the  CHICAGO  REAL  ESTATE  BOARD  FORM,  for improved  prop- 
erty. 

A  Certificate  of  Title  issued  by  the  Registrar  of  Titles  of County, 

or  complete  merchantable  Abstract  of  Title,  or  merchantable  copy,  shall  be 
furnished  by  the  vendor  within  a  reasonable  time,  brought  down  to  date  hereof, 
which  abstract  shall,  upon  the  consummation  of  this  sale,  remain  with  the 
vendor,  or  his  assigns,  as  part  of  his  security,  until  the  deferred  installments 
are  fully  paid.  The  purchaser  or  his  attorney  shall,  within  ten  days  after 
receiving  such  abstract,  deliver  to  the  vendor  or  his  agent,  (together  with  the 
abstract),  a  note  or  memorandum  in  writing,  signed  by  him  or  his  attorney, 
specifying  in  detail  the  objections  he  makes  to  the  title,  if  any;  or,  if  none, 
then  stating  in  substance  that  the  same  is  satisfactory.  In  case  material  defects 
be  found  in  said  title,  and  so  reported,  then  if  such  defects  be  not  cured  within 
sixty  days  after  such  notice  thereof,  this  contract  shall,  at  the  purchaser's  option 
become  absolutely  null  and  void,  and  said  earnest  money  shall  be  returned; 
notice  of  such  election  to  be  given  to  the  vendor;  but  the  purchaser  may  never- 
theless elect  to  take  such  title  as  it  then  is,  and  in  such  case  the  vendor  shall 
convey,  as  above  agreed;  provided,  however,  that  such  purchaser  shall  have 
first  given  a  written  notice  of  such  election,  within  ten  days  after  the  expiration 
of  the  said  sixty  days,  and  tendered  performance  hereof  on  his  part.  In  default 
of  such  notice  of  election  to  perform,  and  accompanying  tender,  within  the  time 
so  limited,  the  purchaser  shall,  without  further  action  by  either  party,  be 
deemed  to  have  abandoned  his  claim  upon  said  premises,  and  thereupon  this 
contract  shall  cease  to  have  any  force  or  effect  as  against  said  premises,  or  the 
title  thereto,  or  any  right  or  interest  therein,  but  not  otherwise. 

Should  said  purchaser  fail  to  perform  this  contract  promptly  on  his  part,  at 
the  time  and  in  the  manner  herein  specified,  the  earnest  money  paid  as  above, 
shall,  at  the  option  of  the  vendor,  be  forfeited  as  liquidated  damages,  and 
this  contract  shall  thereupon  become  and  be  null  and  void.  Time  is  of  the 
essence  of  this  contract,  and  of  all  the  conditions  hereof. 

The  notices  required  to  be  given  by  the  terms  of  this  agreement  shall  in  all 
cases  be  construed  to  mean  notices  in  writing,  signed  by  or  on  behalf  of  the 
party  giving  the  same,  and  the  same  may  be  served  either  upon  the  other  party 
or  his  agent. 

This  contract  and  the  said  earnest  money  shall  be  held  by for  the 

mutual  benefit  of  the  parties  concerned,  and  after  the  consummation  of  the 
sale  ..he.,  shall  be  at  liberty  to  retain  the  canceled  contract  permanently:  and 

it  shall  be  the  duty  of  said  in  case  said  earnest  money  be  forfeited 

as  herein  provided,  to  apply  the  same,  first,  to  the  payment  of  any  expenses 
incurred  for  the  vendor  by  his  agent  in  said  matter,  and  second,  to  the  pay- 
ment to  vendor's  broker  of  a  commission  of per  cent  on  the  selling  price 

herein  mentioned,  for  his  services  in  procuring  this  contract  rendering  the 
overplus  to  the  vendor. 

WITNESS  the  hands  of  the  parties  hereto,  this day  of A.  D.  19. . 


228    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  11 

REAL   ESTATE   BOARD    SALE   CONTRACT- 
COO/:  CO.,  ILLS. 

Approved  by  Chicago  Real  Estate  Board 

THIS  MEMORANDUM  WITNESSETH,  That hereby  agree. .  to 

purchase  at  the  price  of    ( )    Dollars,   the   following  described   real 

estate,  situated  in  the  County  of  Cook  and  State  of  Illinois 


Section Township North,  Range East  of 

the  Third  Principal   Meridian,    and 

agree.,    to   sell   said   premises    at   said   price,    and   to    convey   to    said    pur- 
chaser a  good  and  merchantable  title  thereto,  by general  Warranty 

Deed,  with  release  of  dower  and  Homestead  rights,  but  subject  to:  (1)   exist- 
ing leases,   expiring the  purchaser   to  be   entitled   to  the   rents  from 

;  (2)  all  taxes  and  assessments  levied  after  the  year  19 ;   ( 3 ) 

any  unpaid  special  taxes  or  special   assessments  levied  for  improvements  not 
yet  completed   and  to  unpaid  installments  of   special   assessments   which  fall 

due   after levied   for   improvements   completed;    also   subject  to    any 

party  wall   agreements  of  record;   to  building   line   restrictions  and  building 
restrictions  of  record,   and  to 


Premiums  on  insurance  policies  held  by  Mortgagee  shall  be  paid  for  by  said 

first  party  pro  rata  for  the  unexpired  time.    Said  purchaser  has  paid  ( ) 

Dollars  as  earnest  money,  to  be  applied  on  such  purchase  when  consummated, 
and  agrees  to  pay  within  five  days  after  the  title  has  been  examined  and 
found  good,  or  accepted  by  him,  said  insurance  premium  and  the  further  sum 

of Dollars,  at  the  office  of Chicago,  provided  a  good 

and  sufficient general  Warranty  Deed,  conveying  to  said  purchaser 

a  good  and  merchantable  title  to  said  premises  (subject  as  aforesaid),  shall 
then  be  ready  for  delivery.  The  balance  to  be  paid  as  follows 


with  interest  from  the  date  hereof  at  the  rate  of per  cent  per  annum, 

payable  semi-annually,  to  be  secured  by  the  purchaser's  notes  and  mortgage, 
or  trust  deed,  of  even  date  herewith,  on  said  premises,  in  the  form  known  as 

the    CHICAGO    REAL    ESTATE    BOARD    FORM    for improved 

property. 

A  Certificate  of  Title  issued  by  the  Registrar  of  Titles  of  Cook  County,  or 
complete  merchantable  Abstract  of  Title  or  merchantable  copy,  brought  down 

to  date  hereof,  or  merchantable  Title  Guaranty  Policy  made  by shall 

be  furnished  by  the  vendor  within  a  reasonable  time,  which  abstract  shall, 
upon  the  consummation  of  this  sale,  remain  with  the  vendor,  or  his  assigns, 
as  part  of  his  security,  until  the  deferred  installments  are  fully  paid.  The 
purchaser  or  his  attorney  if  an  abstract  or  copy  be  furnished  shall,  within  ten 
days  after  receiving  such  abstract,  deliver  to  the  vendor  or  his  agent  (to- 
gether with  the  abstract),  a  note  or  memorandum  in  writing,  signed  by  him  or 
his  attorney,  specifying  in  detail  the  objections  he  makes  to  the  title,  if  any; 
or  if  none,  then  stating  in  substance  that  the  same  is  satisfactory.  In  case 


APPENDIX  229 

material  defects  be  found  in  said  title,  and  so  reported,  then,  if  such  defects 
be  not  cured  within  sixty  days  after  such  notice  thereof,  this  contract  shall,  at 
the  purchaser's  option  become  absolutely  null  and  void,  and  said  earnest  money 
shall  be  returned;  notice  of  such  election  to  be  given  to  the  vendor;  but  the 
purchaser  may  nevertheless  elect  to  take  such  title  as  it  then  is,  and  in  such 
case  the  vendor  shall  convey,  as  above  agreed;  provided,  however,  that  such 
purchaser  shall  have  first  given  a  written  notice  of  such  election,  within  ten 
days  after  the  expiration  of  the  said  sixty  days,  and  tendered  performance 
hereof  on  his  part.  In  default  of  such  notice  of  election  to  perform,  and 
accompanying  tender,  within  the  time  so  limited,  the  purchaser  shall,  without 
further  action  by  either  party,  be  deemed  to  have  abandoned  his  claim  upon 
said  premises,  and  thereupon  this  contract  shall  cease  to  have  any  force  or 
effect  as  against  said  premises,  or  the  title  thereto,  or  any  right  or  interest 
therein,  but  not  otherwise. 

Should  said  purchaser  fail  to  perform  this  contract  promptly  on  his  part, 
at  the  time  and  in  the  manner  herein  specified,  the  earnest  money  paid  as 
above,  shall,  at  the  option  of  the  vendor  be  retained  by  the  vendor  as  liqui- 
dated damages,  and  this  contract  shall  thereupon  become  and  be  null  and  void. 
Time  is  of  the  essence  of  this  contract,  and  of  all  the  conditions  hereof. 

The  notices  required  to  be  given  by  the  terms  of  this  agreement  shall  in  all 
cases  be  construed  to  mean  notices  in  writing,  signed  by  or  on  behalf  of  the 
party  giving  the  same,  and  the  same  may  be  served  either  upon  the  other 
party  or  his  agent. 

If  the  taxes  and  assessments  to  be  paid  by  the  vendor  cannot  be  paid  at  time 
this  contract  is  to  be  closed  then  the  vendor  is  to  pay  same  on  or  before  May 
1st,  next  ensuing. 

This  contract  and  the  said  earnest  money  shall  be  held  by for  the 

mutual  benefit  of  the  parties  concerned,  and  after  the  consummation  of  the 

sale he shall  be  at  liberty  to  retain  the  canceled  contract  permanently; 

and  it  shall  be  the  duty  of  said in  case  said  earnest  money  be  re- 
tained as  herein  provided,  to  apply  the  same,  first,  to  the  payment  of  any 
expenses  incurred  for  the  vendor  by  his  agent  in  said  matter,  and  second,  to 

the  payment  to  vendor's  broker  of  a  commission  of per  cent  on  the 

selling  price  herein  mentioned,  for  his  services  in  procuring  this  contract  ren- 
dering the  overplus  to  the  vendor. 

WITNESS  the  hands  of  the  parties  hereto  this day  of A  D 

19.. 


Copyright,  1903,  by  the  Chicago  Real  Estate  Board. 

No.  12 

INSTALLMENT  HOUSE  CONTRACT 

AGREEMENT,    made    this day    of ,    19 ,    between 

hereinafter  throughout  described   as  the  seller,  and 


hereinafter  throughout  described   as   the   purchaser. 

WITNESSETH,   That  the  seller   agrees  to  sell    and   convey,   and  the   pur- 


230    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

chaser  agrees  to  purchase  all  that  lot  of  land  with  the  improvements  thereon, 

situate,  lying  and  being  in  the , 

bounded  and  described  as  follows,  to  wit: — 

(DESCRIPTION) 

SUBJECT  TO: 


The  price  is Dollars,  payable  as  follows: 

Dollars  on  the  signing  of  this  contract,  the  receipt  whereof  is  hereby  acknowl- 
edged. 

Dollars  (insert  installment  terms  as,  for  example : 

in  twelve  monthly  installments  as  follows:  First  installment  of  THREE 
HUNDRED  ($300)  DOLLARS  due  the  15th  of  April,  1920,  and  there- 
after eleven  monthly  installments  at  the  rate  of  TWO  HUNDRED  ($200) 
DOLLARS  each  in  addition  to  interest  at  the  rate  of  6%  per  annum  on  the 
unpaid  balance  of  the  purchase  price;  said  interest  to  be  computed  from  the 
1st  day  of  April,  1920,  first  installment  of  principal  and  interest  on  unpaid 
balance  to  be  paid  April  15,  1920,  and  monthly  thereafter.)  On  receipt  of  the 
above  payments  a  deed  will  be  delivered  as  hereinafter  provided. 

AT  THE  TIME  OF  CLOSING  TITLE  hereunder  the  balance  of  the  pur- 
chase price  then  due  ( )  shall  be  made  up  by  first  and  second  mortgages 

as  follows: 

THE  FIRST  MORTGAGE  shall  be  for  $ and  shall 

bear  interest  at  the  rate  of  6%  per  annum  and  shall  run  for  three  years.  The 
seller  agrees  to  procure  for  the  purchaser  at  the  expense  of  the  purchaser 

(which  expense  is  not  to  exceed  the  sum  of  $ ,  which  shall 

include  the  searching  and  insurance  of  title  for  the  amount  of  $ ) 

an  acceptance  of  the  above  first  mortgage,  provided  the  purchaser  complies 
with  the  usual  requirements  regarding  loans  and  the  purchaser  shall  pay  the 
usual  charges. 

THE  SECOND  MORTGAGE  shall  be  for  $ and  shall 

be  a  purchase  money  mortgage  executed  and  delivered  by  the  purchaser  to 
the  seller  covering  the  above  described  premises  bearing  interest  at  the  rate 
of  6%  per  annum  and  said  mortgage  shall  be  conditioned  for  the  payment 

of  ($ )   DOLLARS  or  more  monthly  in  addition  to  interest 

at  the  rate  of  6%  until  said  principal  sum  is  fully  paid. 

IF  AT  THE  TIME  OF  DELIVERY  OF  DEED  said  premises  shall  be  sub- 
ject to  a  first  mortgage  which  has  not  yet  become  due,  the  seller  shall  have  the 
privilege  of  delivering  said  premises  subject  to  such  existing  first  mortgage 
instead  of  procuring  a  new  first  mortgage  as  above  provided.  In  that  event 
the  second  mortgage  shall  be  for  the  difference  between  the  amount  of  such 
mortgage  and  the  sum  of  the  first  and  second  mortgages  herein  stated. 

ALL  TAXES,  ASSESSMENTS,  WATER  RATES  and  FIRE  INSURANCE 

PREMIUMS  becoming  liens  on  said  premises  on  and   after are  to 

be  assumed  by  the  purchaser  who  agrees  to  pay  the  same  as  hereinbefore  pro- 
vided within  twenty  days  after  such  taxes,  water  rates  and  fire  insurance 
premiums  shall  have  become  liens  on  the  above  described  premises. 

IT  IS  UNDERSTOOD  AND  AGREED  that  should  the  Purchaser  with  the 
written  consent  of  the  Seller  take  possession  of  said  premises  prior  to  the 
delivery  of  the  deed,  such  possession  shall  be  as  a  monthly  tenant  of  the 
Seller  and  all  moneys  theretofore  or  thereafter  paid  under  this  contract  and 
all  improvements  on  the  premises  shall  be  the  agreed  rent  of  such  premises 
covering  the  periods  during  which  such  payments  are  made,  but  deed  shall 
be  delivered  if  payments  are  made  as  above  provided.  Should  default  be 


APPENDIX  231 

made  in  any  of  such  payments  and  remain  in  arrears  for  twenty  (20)  days, 
then  at  the  option  of  the  Seller,  its  successors  or  assigns,  this  agreement  shall 
be  void  and  of  no  effect,  excepting  as  to  this  paragraph,  or  the  Seller  may 
disregard  the  provisions  of  this  paragraph  and  enforce  its  rights  reserved  in 
the  remainder  of  this  agreement.  The  Purchaser  shall  thereupon  pay  to  the 
Seller  and  the  Seller  shall  accept  payments  required  by  the  terms  of  this  con- 
tract on  the  dates  herein  specified  as  and  for  the  agreed  rental  of  such 
premises  covering  the  time  between  the  dates  specified  for  such  payments  to 
be  made.  Should  the  Purchaser  fail  to  make  any  such  payments  as  heretofore 
required  thereupon  the  Seller  shall  be  entitled  to  and  shall  receive  the  sur- 
render of  said  premises  and  the  improvements  thereon  as  Landlord  of  the  Pur- 
chaser, and  the  Purchaser  hereby  agrees  that  the  Seller  may  institute  and 
maintain  legal  action  or  summary  proceedings  for  non-payment  of  rent  in 
any  proper  court  to  obtain  such  possession  and  rental  sums  as  against  a  monthly 
tenant. 

The  deed  shall  be  a  bargain  and  sale  deed,  with  covenant  against  grantor's 
acts  and  shall  be  executed  and  acknowledged  by  the  seller,  at  the  seller's 
expense  to  convey  to  the  purchaser,  the  absolute  fee  of  the  above  premises, 
free  from  all  incumbrances,  except  as  herein  stated. 

All  instruments  called  for  by  this  contract  are  to  be  drawn  by  the  attorney 
for  the  seller,  and  all  charges  for  drawing  and  recording  same,  including 
mortgage  tax  and  revenue  stamps,  except  the  drawing  of  deed  and  revenue 
stamps  thereon,  shall  be  paid  by  the  purchaser. 

In  the  event  that  the  title  to  the  premises  shall  prove  unmarketable,  the  only 
obligation  of  the  seller  shall  be  to  refund  the  purchase  money  paid  on  account 
Ok  this  contract  and  the  expense  of  the  examination  of  title. 

Said  deed  shall  be  delivered  at  the  office  of on at 

....M.  upon  receipt  of  said  payments. 

Rents,  interest  on  mortgages,  private  water  rates,  and  insurance  premiums, 
if  any,  are  to  be  apportioned. 

The  risk  of  loss  or  damage  to  said  premises  by  fire  to  the  extent  of  $ 

until  the  delivery  of  said  deed  is  assumed  by  the  seller. 

Any  gas  fixtures  and  chandeliers  now  on  said  premises  belonging  to  the 
seller  are  included  in  this  sale. 

The  stipulations  aforesaid  are  to  apply  to  and  bind  the  heirs,  executors, 
administrators,  and  successors  of  the  respective  parties. 

The  seller  agrees  that is  the  broker  who   has  brought   about  this 

sale,  and  agrees  to  pay  said  broker  his  commission  therefor. 

WITNESS,  the  corporate  seal  of  the  seller  and  the  signature  of  two  of  its 
officers  and  the  hand  and  seal  of  the  purchaser. 
IN  PRESENCE  OF 


No.  13 

INSTALLMENT  LOT  CONTRACT 

AGREEMENT,  made  this day  of nineteen  hundred  and 

,  between  ,  hereinafter  throughout  described  as  the  Seller, 

and  hereinafter  throughout  described  as  the  Purchaser,  residing 

at 

WITNESSETH  that  the  Seller  agrees  to  sell  and  convey,  and  the  Purchaser 
agrees  to  purchase  ALL  that  certain  lot,  piece  or  parcel  of  land  situate,  lying 


232    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

and  being  at  in  the  ,  and  known  and  designated  as 

and  by  lot  Number in  block ,  on  the  map  of  the  property 

of  the  Seller  entitled  ,  together  with  the  right  of  access  over  the 

surface  of  the  street  only.     The  title  to  the  land  in  such  street  or  courts,  lanes 
or  alleys  or  rights  of  way  is  not  to  be  conveyed  but  shall  remain  in  the  Seller, 
and  all  franchise  rights  in  the  Streets  and  Avenues  shown  on  said  Map  are 
reserved  to  the  seller. 
THE  PRICE  is  Dollars,  payable  as  follows :  

Dollars  paid  on  signing  this  Contract,  and  


With  interest  on  the  unpaid  balances  from  the  date  of  this  agreement  at  the 
rate  of  six  per  cent  per  annum,  payable  with  each  installment  as  hereinabovt 
provided  for. 

If  any  part  of  said  price  is  to  be  paid  by  giving  back  a  purchase  money  Bond 
and  Mortgage,  the  Purchaser  shall  pay  the  expenses  of  preparing  and  record- 
ing said  Bond  and  Mortgage  and  shall  pay  the  mortgage  tax,  and  necessary 
revenue  stamps  on  the  bond. 

The  Purchaser  assumes  and  will  pay  any  and  all  taxes  and  assessments  and 
water  rates  which  may  become  a  lien  upon  the  premises  above  described  after 
the  date  of  this  contract.  In  case  said  taxes  or  assessments  are  paid  by  the 
Seller  the  Purchaser  will,  upon  demand,  repay  the  amount  so  paid,  together 
with  interest  at  the  rate  of  six  per  cent  per  annum  from  the  date  of  the  payment 
by  the  Seller. 

The  following  are  the  terms  and  conditions  of  this  contract: 

FIRST:      The    Purchaser    agrees    to    make    the    payments    above    mentioned 

promptly.    All  payments  shall  be  made  to  the  Seller  at  its  office,  No , 

and  only  such  payments  as  shall  be  receipted  for  by  an  authorized  representa- 
tive of  the  Company  shall  be  recognized  by  the  Seller. 

SECOND:  Time  shall  be  the  essence  of  this  agreement  and  of  all  its  condi- 
tions, and  in  case  the  Purchaser  shall  fail  to  make  said  payments,  or  any  of 
them,  when  the  same  shall  become  due,  then  this  contract  shall  become  null  and 
void,  and  all  rights  of  the  Purchaser  under  this  agreement  shall  be  cancelled, 
and  the  amounts  paid  on  this  contract  shall  be  forfeited  to  the  Seller  at  its 
option  and  shall  remain  its  property  as  liquidated  damages  for  failure  to  ful- 
fill this  agreement  completely;  or  at  the  option  of  the  Seller,  the  balance  due 
under  this  contract  shall  become  immediately  due  and  payable. 

THIRD:  No  modification  of  this  agreement  in  any  of  its  particulars  shall  be 
binding  upon  the  Seller  unless  the  same  is  in  writing  and  duly  approved  by 
the  seller. 

FOURTH:  No  assignment  of  this  contract  shall  be  recognized  without  the 
written  consent  of  the  Seller. 

FIFTH:  The  Seller  agrees  to  give  and  the  Purchaser  agrees  to  accept  a  title 
such  as  the Company  will  approve  and  insure. 

SIXTH:  Upon  the  payment  of  the  above  amount  set  forth  in  full  and  when 
all  the  terms  and  conditions  of  this  contract  have  been  complied  with  by  the 
Purchaser,  the  Seller  will  convey  to  the  Purchaser  the  premises  above  de- 
scribed by  Full  Covenant  and  Warranty  Deed  free  from  all  encumbrances 
except  as  herein  stated,  and  said  deed  shall  also  contain  the  following 
covenants. 


APPENDIX  233 

SEVENTH:  The  covenants  to  be  inserted  in  the  deed  of  said  premises  are  as 
follows: 

AND  the  said  party  of  the  second  part  for  the  party  of  the  second  part  and 
the  heirs,  successors  and  assigns  of  the  party  of  the  second  part  does  hereby 
covenant  and  agree  to  and  with  the  said  party  of  the  first  part,  its  successors 
and  assigns  as  follows: 

1st:  That  neither  the  said  party  of  the  second  part,  nor  the  heirs,  succes- 
sors or  assigns  of  the  party  of  the  second  part  shall  or  will  erect,  or  cause  or 
suffer  to  be  erected,  or  use  or  cause  or  suffer  to  be  used  on  any  portion  of 
said  premises,  any  building  except  a  dwelling  house  for  one  family  only,  and 
which  building  shall  not  have  a  roof  of  the  character  or  description  commonly 
known  as  a  flat  roof. 

2nd:  That  neither  the  said  party  of  the  second  part  nor  the  heirs,  succes- 
sors or  assigns  of  the  party  of  the  second  part  shall  or  will  erect,  or  cause  or 
suffer  to  be  erected,  or  use  or  cause  or  suffer  to  be  used,  on  any  portion  of  said 
premises,  more  than  one  building  on  each  lot  of  land  as  said  lots  are  shown 
and  laid  out  on  the  map  hereinbefore  mentioned;  and  no  building  or  part  of 
building  shall  cover  more  than  fifty  (50)  per  cent  of  the  area  of  any  of  the 
lots  as  shown  and  laid  out  on  the  above  mentioned  map,  and  no  building  or 
structure  of  any  kind  or  nature  shall  be  erected,  suffered  or  permitted  to  be 
erected  or  used  within  five  feet  of  building  line  of  any  Street,  Avenue,  Court, 
Lane  or  Parkway,  nor  within  five  feet  of  the  rear  line  of  any  of  said  lots, 
nor  within  three  feet  of  the  side  lines  of  any  of  said  lots. 

3rd:  That  neither  the  said  party  of  the  second  part  nor  the  heirs,  successors 
or  assigns  of  the  party  of  the  second  part  shall  or  will  manufacture  or  sell  or 
cause  or  permit  to  be  manufactured  or  sold  or  kept  for  sale  on  any  portion 
of  the  premises  hereby  conveyed  any  goods  or  merchandise  of  any  kind  and 
will  not  carry  on  or  cause  or  permit  to  be  carried  on,  any  trade  or  business 
whatsoever  upon  any  part  of  said  premises. 

4th:  That  neither  the  said  party  of  the  second  part  nor  the  heirs,  successors  or 
assigns  of  the  party  of  the  second  part  shall  or  will  construct  or  permit  upon  any 
portion  of  said  premises  any  tight  board  or  close  built  fence  whatsoever,  nor 
any  fence  nearer  the  street  line  on  which  said  house  fronts  than  the  front  wall 
of  the  house,  excepting  that  a  hedge  may  be  placed  in  front  on  the  building 
line,  provided,  however,  that  no  fence  or  hedge  whatsoever  shall  be  permitted 
of  a  greater  height  than  two  feet. 

5th:  That  neither  the  said  party  of  the  second  part  nor  the  heirs,  succes- 
sors or  assigns  of  the  party  of  the  second  part  shall  or  will  erect,  suffer  or 
permit,  maintain  or  carry  on  upon  said  premises  or  any  part  thereof  any 
slaughterhouse,  blacksmith  shop,  forge,  foundry  or  furnace,  or  any  manufac- 
tory or  factory  of  any  kind  or  nature  whatsoever,  or  any  tannery  or  other 
factory  for  the  manufacture,  preparation  or  treatment  of  skins,  hides  or 
leather,  or  any  brewery,  malt  house  or  distillery,  or  any  building  or  other 
structure  for  the  manufacture  of  any  malt  or  spirituous  or  distilled  liquors,  or 
to  be  used  for  the  carrying  on  of  any  noxious,  dangerous  or  offensive  trade  or 
business,  or  any  hotel  or  boarding  or  community  house,  or  any  building  to  be 
used  as  a  hospital  for  the  care  or  treatment  of  any  disease  either  of  persons 
or  animals,  or  any  asylum  for  the  care  or  treatment  of  the  insane,  nor  shall 
said  premises  be  used  for  a  cemetery. 

6th:  And  the  party  of  the  second  part  for  the  party  of  the  second  part  and 
the  heirs,  successors  and  assigns  of  the  party  of  the  second  part  further  cove- 
nants that  the  property  conveyed  by  this  deed  shall  be  subject  to  an  annual 
charge  in  such  an  amount  as  will  be  fixed  by  the  party  of  the  first  part,  its 
successors  and  assigns  not,  however,  exceeding  in  any  year  the  sum  of  Four 
($4.00)  Dollars  per  lot  as  the  said  lots  are  shown  on  map  hereinbefore  men- 


234    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

tioned.  The  assigns  of  the  party  of  the  first  part  may  include  a  Property 
Owners'  Association  which  may  hereafter  be  organized  for  the  purposes  re- 
ferred to  in  this  paragraph,  and  in  case  such  association  is  organized,  the  sums 
in  this  paragraph  provided  for  shall  be  payable  to  such  association.  The 
party  of  the  second  part  for  the  party  of  the  second  part  and  the  heirs,  suc- 
cessors and  assigns  of  the  party  of  the  second  part  covenants  that  they  will 
pay  this  charge  to  the  party  of  the  first  part,  its  successors  and  assigns  on  the 
first  day  of  May  in  each  and  every  year,  and  further  covenants  that  said 
charge  shall  on  said  date  in  each  year  become  a  lien  on  the  land  and  shall 
continue  to  be  such  lien  until  fully  paid.  Such  charge  shall  be  payable  to  the 
party  of  the  first  part  or  its  successors  or  assigns,  and  shall  be  devoted  to  the 
maintenance  of  the  roads,  paths,  parks,  sewers,  and  such  other  public  purposes 
as  shall  from  time  to  time  be  determined  by  the  party  of  the  first  part,  its  suc- 
cessors or  assigns.  And  the  party  of  the  second  part  by  the  acceptance  of 
this  deed  hereby  expressly  vests  in  the  party  of  the  first  part,  its  successors  and 
assigns,  the  right  and  power  to  bring  all  actions  against  the  owner  of  the 
premises  hereby  conveyed  or  any  part  thereof  for  the  collection  of  such  charge 
and  to  enforce  the  aforesaid  lien  therefor. 

7th:  These  covenants  shall  run  with  the  land  and  shall  be  construed  as 
real  covenants  running  with  the  land  until  January  31st,  1930,  when  they  shall 
cease  and  determine.  Except,  however,  it  is  mutually  understood  and  agreed 
that  the  above  covenants  and  restrictions  or  any  of  them  may  be  altered,  modi- 
fied or  annulled  at  any  time  prior  to  said  January  31st,  1930,  by  written  agree- 
ment by  and  between  the  seller,  its  successors  or  assigns,  and  the  owner  for 
the  time  being  of  the  premises  upon  which  it  is  agreed  to  alter,  modify  or 
annul  said  covenants  and  restrictions  and  such  agreement  shall  be  effectual  to 
alter,  modify  or  annul  such  covenants  and  restrictions  as  to  such  premises 
without  the  consent  of  the  owner  or  owners  of  any  adjacent  premises.  Noth- 
ing herein  contained  shall  be  construed,  nor  shall  there  be  any  obligation  upon 
the  party  of  the  first  part,  its  successors  or  assigns,  to  restrict  in  any  manner 
any  other  property  shown  upon  said  map  now  or  hereafter  owned  by  the  party 
of  the  first  part,  its  successors  or  assigns. 

8th:  In  addition  to  all  sums  and  items  hereinbefore  agreed  to  be  paid,  the 
purchaser  agrees  to  pay  to  the  seller,  its  successors  and  assigns,  an  annual 
charge  in  such  an  amount  as  will  be  fixed  by  the  seller,  or  its  successors 
or  assigns,  not  however,  exceeding  in  any  year  the  sum  of  Four  Dollars  ($4.00) 
per  lot  as  shown  on  map  hereinbefore  mentioned.  The  assigns  of  the  party 
of  the  first  part  may  include  a  Property  Owners'  Association,  which  may  have 
been  or  may  hereafter  be  organized  for  the  purpose  referred  to  in  this  para- 
graph, and  in  case  such  association  is  organized,  the  sums  in  this  paragraph 
provided  for  shall  be  payable  to  such  association.  The  purchaser  covenants 
and  agrees  to  pay  this  charge  on  the  first  day  of  May  in  each  and  every  year 
from  the  date  of  this  contract  to  the  date  of  the  delivery  of  the  deed  as  here- 
inabove  provided,  and  such  annual  charge  shall  be  added  to  and  deemed  part 
of  the  sums  required  to  be  paid  by  this  contract.  Such  annual  charge  shall 
be  devoted  to  the  maintenance  of  the  roads,  paths,  parks,  sewers,  and  such 
other  public  purposes  as  shall  from  time  to  time  be  determined  by  the  seller, 
its  successors  or  assigns. 

9th:  IT  IS  UNDERSTOOD  AND  AGREED  that  the  purchaser  is  to  enter 

into  and  take  possession  of  said  premises  on  or  about as  tenant  of 

the  seller,  and  that  all  monies  paid  or  to  be  paid  on  and  after  the  date  of 
this  contract  and  all  improvements  made  on  the  premises  shall  be  considered 
as  and  shall  be  rent  of  said  premises,  for  the  use  and  occupancy  thereof  until 
delivery  of  the  deed  as  above  provided;  and  should  any  default  be  made  in 
any  of  the  payments  as  above  provided  on  any  day  whereon  same  is  made 


APPENDIX  235 

payable  and  remain  unpaid  and  in  arrears  for  the  space  of  twenty  (20)  days, 
then  in  that  event  this  agreement  shall,  at  the  option  of  the  seller  or  its  legal 
representatives,  become  and  be  void  and  of  no  effect,  except  as  to  this  clause, 
and  the  seller  shall  be  entitled  to  and  shall  receive  full  surrender  and  posses- 
sion of  said  premises  and  the  improvements  thereon  as  landlord  of  the  pur- 
chaser without  further  notice;  and  the  purchaser  hereby  agrees  that  the  seller 
may  begin  dispossess  proceedings  in  any  court  for  such  possession  as  against  a 
monthly  tenant. 

SUBJECT,  however,  to  Building  Zone  restrictions  of  the  City  of  New  York 
and  any  modifications  thereof. 


The  stipulations  aforesaid  are  to  apply  to  and  bind  the  heirs,  executors,  ad- 
ministrators, successors  and  assigns  of  the  respective  parties. 

IN  WITNESS  WHEREOF  the  party  of  the  first  part  has  caused  these 
presents  to  be  signed  by  one  of  its  officers  and  its  corporate  seal  to  be  hereunto 

affixed  and  the  said  party  of  the  second  part  ha hereunto  set 

hand and  seal the  day  and  year  first  above  written. 

IN  PRESENCE  OF 


No.  14 

CONTRACT  TO  SELL  WITH  BUILDING  LOAN 

AGREEMENT  made  this  day ,  19...,  between  

hereinafter  designated  as  the  seller,  and  hereinafter  designated 

as  the  purchaser. 

The  seller  agrees  to  sell  the  lot  of  land  described  in  Schedule  A,  hereto 
annexed,  and  to  convey  the  same  to  the  purchaser  by  a  proper  deed  for  the 

sum  of  dollars,  and  the  purchaser  agrees  to  purchase  said  lot  and 

pay  said  price  therefor  as  follows: 

dollars  in  cash  on  the  execution  and  delivery  of  this 

agreement,  receipt  whereof  is  hereby  acknowledged 


dollars  by  the  purchaser  executing  and  delivering  to  the  seller  the 

bond  of  the  purchaser  conditioned  for  the  payment  of  said  sum  on  the  

day  of ,  19. . .,  with  interest  thereon  at  the  rate  of per  cent  per 

annum  payable  semi-annually,  secured  by  a  purchase  money  mortgage  cover- 
ing said  premises,  which  shall  contain  the  clauses  usually  employed  by  the 
Title  Guarantee  and  Trust  Company  in  its  mortgages,  and  also  a  clause  to 
the  effect  that  if  the  purchaser  does  not  proceed  with  the  erection  of  the  build- 
ing as  hereinafter  provided,  such  bond  and  mortgage  and  the  amount  secured 
thereby  shall  become  due  at  the  option  of  the  holder  thereof.  The  deed  shall 
recite  a  consideration  of  one  hundred  dollars  and  other  valuable  consideration. 

Said  deed  and  bond  and  mortgage  shall  be  delivered  at  the  office  of  the 

Title  Guarantee  and  Trust  Company,  Borough  of in  the 

City  of  New  York  on  the day  of 19. . .,  at o'clock  . .  .M. 

The  purchaser  agrees  within  one  month  of  the  date  hereof  to  cause  to  be 
prepared  by  a  competent  architect,  plans  and  specifications  conforming  with 
all  laws  and  municipal  regulations  and  satisfactory  to  the  seller  for  the  erection 


236    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

upon  said  land  of  the  building  described  in  Schedule  B,  hereto  annexed  (here- 
inafter designated  as  the  building),  and  after  obtaining  the  seller's  approval, 
continuously  to  proceed  with  the  erection  of  said  building  so  that  the  same  will 
be  enclosed  within  months  after  the  delivery  of  said  deed  and  com- 
pletely finished  and  ready  for  occupancy  within  months  after  said 

delivery.. 

The  seller  agrees  that  if  the  purchaser  proceeds  with  the  erection  of  the 
building  as  above  provided,  the  seller  will  loan  or  procure  to  bo  loaned  to  the 

purchaser  the  sum  of dollars  to  be  advanced  in  installments  as  set  forth 

in  Schedule  C,  hereto  annexed,  which  loan  shall  be  secured  by  the  bond  of 
the  purchaser  conditioned  for  the  repayment  of  the  amounts  so  advanced  on 

19. . .,  with  interest  thereon  at  the  rate  of per  cent  per  annum, 

payable  semi-annually,  secured  by  a  mortgage  covering  said  premises,  in  which 
the  wife  of  the  purchaser,  if  any,  shall  join,  which  shall  be  a  valid  lien  next 
after  such  purchase  money  mortgage  for  all  sums  that  may  be  advanced  thereon, 
subject  to  no  encumbrance,  except  such  as  may  be  waived  by  the  seller,  or  at 
the  option  of  the  seller  or  any  holder  thereof  said  mortgage,  which  is  here- 
after referred  to  as  the  building  loan  mortgage,  shall  be  a  first  lien  on  said 
premises  for  all  sums  that  may  be  advanced  thereon,  and  then  the  purchase 
money  mortgage  to  be  given  as  hereinbefore  provided  shall  be  a  second  lien 
on  said  premises,  subject  only  to  said  building  loan  mortgage.  The  building 
loan  mortgage  shall  contain  the  clauses  usually  employed  by  the  Title  Guar- 
antee and  Trust  Company  in  its  building  loan  mortgages. 

And  the  parties  hereto  further  agree  with  each  other  as  follows:  that  the 
seller  may  employ  a  watchman  to  protect  the  building  from  depredation  or 
injury;  that  if  the  construction  of  said  building  should  be  discontinued  at  any 
time  or  should  not  be  carried  on  with  reasonable  despatch,  the  seller  may  pur- 
chase materials  and  employ  workmen  to  complete  or  protect  said  building  so 
that  the  same  will  not  suffer  from  depredation  or  the  weather;  that  if  any 
mechanic's  lien  or  liens  should  be  filed  against  said  premises,  the  seller  may 
retain  or  may  deposit  in  behalf  of  the  purchaser,  with  the  Clerk  of  the  County 

of sums  sufficient  to  satisfy  such  lien  or  liens;  that  if  interest  should 

become  overdue  on  any  prior  mortgage,  the  seller  may  pay  the  same;  that  if 
any  taxes,  assessments  or  water  rates  affecting  said  premises  should  become 
due  and  remain  unpaid,  the  seller  may  pay  the  same,  and  any  sums  paid  or 
expended  in  accordance  with  any  of  the  foregoing  clauses  shall  be  deemed  to 
be  advanced  to  the  purchaser  and  to  be  secured  by  said  bond  and  building  loan 
mortgage,  and  may  be  applied  at  the  option  of  the  seller  to  any  advances  there- 
after becoming  due. 

If  the  purchaser  should  assign  this  contract  or  any  interest  therein,  or  assign 
any  right  to  receive  any  payment  or  portion  of  a  payment  herein  provided  for, 
or  give  to  any  person  or  corporation  an  order  on  the  seller  for  the  payment  of 
any  moneys  payable  under  this  agreement,  or  should  convey  said  premises  or  any 
interest  therein,  or  if  said  premises  should  become  encumbered  by  any  lien  or  en- 
cumbrance, not  herein  provided  for,  or  if  the  purchaser  should  not  proceed  con- 
tinuously with  the  erection  and  completion  of  said  building  (stoppage  by  reason 
of  actual  strikes  excepted),  or  if  a  petition  in  bankruptcy  should  be  filed  by  or 
against  the  purchaser,  or  if  default  should  be  made  in  the  payment  of  interest 
upon  any  of  the  mortgages  herein  mentioned,  or  if  the  building  should  be 
materially  injured  or  destroyed  by  fire  or  other  casualty,  or  if  the  plans  and 
specifications  should  not  be  satisfactory  to  the  seller,  or  if  said  plans  should 
not  be  approved  by  the  Building  Department  before  an  advance  is  demanded, 
or  if  the  materials  and  construction  be  not  satisfactory  to  the  seller,  or  if  any 
materials,  fixtures  or  articles  used  in  the  construction  of  the  building,  or  ap- 
purtenant thereto,  should  be  purchased  by  the  purchaser  so  that  the  absolute 


APPENDIX  237 

ownership  thereof  would  not  vest  in  the  purchaser  immediately  on  delivery  at 
said  building,  or  if  the  purchaser  should  not  produce  upon  demand,  the  con- 
tracts, bills  of  sale  and  agreements,  or  any  of  them,  under  which  the  purchaser 
claims  title  to  the  materials,  fixtures  and  articles  used  in  the  construction  of 
the  building  and  appurtenant  thereto,  or  if  the  building  should  materially  en- 
croach on  property  not  owned  by  the  purchaser  or  if  there  should  be  at  any 
time  any  note  or  notice  of  any  violation  of  law  or  of  any  municipal  regulation 
or  ordinance  filed  in  or  issued  by  any  public  department  or  authority,  when- 
ever, and  as  often  as  any  such  event  occurs,  all  obligation  on  the  part  of  the 
seller  or  the  holder  of  said  building  loan  mortgage  to  make  or  procure  any 
further  advances  shall  cease  if  the  seller  so  elect,  and  the  said  building  loan 
mortgage  debt  shall  become  due  and  payable  at  the  option  of  the  seller  or  of 
the  holder  of  said  building  loan  mortgage,  anything  in  said  bond  or  building 
loan  mortgage  contained  to  the  contrary  notwithstanding;  but  the  holder  of  said 
building  loan  mortgage  may  make  advances  thereafter  without  becoming  liable 
to  make  any  other  advances,  and  without  thereby  waiving  the  right  to  demand 
payment  of  said  mortgage  debt.  Said  building  loan  mortgage  may  contain  the 
foregoing  provisions  or  any  of  them,  but  the  omission  of  any  of  said  provisions 
shall  not  be  a  waiver  of  any  of  them. 

Whenever  required,  the  purchaser  shall  deliver  to  the  holder  of  said  build- 
ing loan  mortgage,  as  further  security  for  the  building  loan,  a  chattel  mortgage 
duly  executed,  covering  all  articles  of  personal  property  and  fixtures  appur- 
tenant to  the  building. 

In  case  any  dispute  arise  between  the  parties  hereto  as  to  any  matter  as  to 
character  and  quality  of  materials  or  labor  or  of  construction  of  building  under 
this  contract,  each  party  shall  select  an  architect,  and  the  decision  of  the  two 
architects  so  selected  shall  be  final  and  binding  on  both  parties.  If  the  two 
architects  cannot  agree,  then  they  shall  select  a  third,  and  his  decision  shall  be 
final  and  binding  on  both  parties. 

All  advances  are  to  be  made  at  the  office  of 

and  the  purchaser  is  to  give  the  seller  three  days'  notice  before  demanding  any 
advance. 

During  the  construction  of  the  building,  the  seller  and  the  holder  of  said 
building  loan  mortgage  and  the  seller's  architects  or  inspectors  may  from  time 
to  time  inspect  the  building. 

No  advance  shall  be  due  unless  all  work  usually  done  at  the  stage  of  con- 
struction when  the  advance  is  payable  under  the  terms  of  Schedule  "C"  be 
done  in  a  good  and  workmanlike  manner,  and  all  materials  and  fixtures  usually 
furnished  and  installed  at  that  time  be  furnished  and  installed,  and  all  iron 
work  and  construction  be  approved  by  an  engineer  satisfactory  to  the  seller 
nor  if  in  the  opinion  of  the  seller  the  advance  will  make  the  total  amount 
then  owing  hereunder  greater  than  the  value  of  the  improvements  then  on  the 
premises,  but  parts  or  the  whole  of  any  installments  may  be  advanced  before 
they  become  due  if  the  seller  or  holder  of  said  building  loan  mortgage  believe 
it  advisable  to  do  so,  and  all  such  advances  or  payments  shall  be  deemed  to 
have  been  made  in  pursuance  of  this  agreement. 

The  making  of  any  advance  or  any  part  of  an  advance,  shall  not  be  deemed 
an  approval  or  acceptance  by  the  seller  or  the  holder  of  said  building  loan 
mortgage  of  the  work  theretofore  done. 

The  purchaser  shall  procure  the  building  loan  mortgage  to  be  recorded  and 
shall  pay  the  expense  of  the  examination  of  title,  and  for  the  searches  which 
may  be  required  by  the  seller  to  assure  the  seller  that  the  building  loan  mort- 
gage is  a  lien  as  herein  covenanted,  and  the  purchaser  shall  furnish  surveys 
nade  by  the  surveyor,  satisfactory  to  the  holder  of  said  building  loan  mort- 


238    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

gage  whenever  required  by  the  holder  as  a  condition  of  the  making  of  an 
advance. 

So  much  of  the  building  loan  herein  agreed  to  be  made  as  may  be  required, 
may  be  applied  by  the  seller  to  the  payments,  satisfaction  or  other  disposition 
of  any  existing  mortgage  or  mortgages  or  other  incumbrances  on  the  premises 
described  on  Schedule  "A,"  and  such  moneys  shall  be  so  applied  toward  such 
payment  or  other  disposition  of  mortgages  or  other  incumbrances,  whenever 
the  seller  may  so  select;  and  so  much  of  said  building  loan  as  may  be  necessary 
may  be  applied  under  the  direction  of  the  purchaser  to  the  payment  of  any 
fees,  brokerage  or  other  expenses  incident  to  the  obtaining  or  making  of  the 
building  loan  herein  agreed  to  be  made. 

In  case  the  building  be  one  to  which  the  provisions  of  the  Tenement  House 
Act  apply, 

(a)  The  first  advance  shall  not  be  due  until  the  plans   and  specifications 
shall  have  been  approved  by  the  Tenement  House  Department,  and  a  written 
certificate  to  that  effect  shall  have  been  issued  by  such  Department. 

(b)  No  other  advance  shall  be  due  unless  the  building  shall  comply  with 
the  provisions  of  the  Tenement  House  Act,  so  far  as  such  Act  then  may  be 
applicable. 

(c)  The  last  advance  shall  not  be  due  until  the  purchaser  shall  produce  a 
certificate  issued  by  the  Tenement  House  Department,  that  said  building  con- 
forms, in  all  respects,  to  the  requirements  of  said  Act. 

So  much  of  the  last  advance  as  may  be  necessary  may  be  applied  to  the  pay- 
ment of  accrued  interest  on  any  mortgage  mentioned  in  this  contract. 

The  seller  or  holder  of  said  building  loan  mortgage  may  release  portions 
of  the  mortgaged  premises  at  any  time  upon  receiving  what,  in  the  opinion  of 
the  seller,  is  a  proper  payment  on  account  of  the  mortgage  debt. 

The  seller  or  any  holder  of  said  building  loan  bond  and  mortgage  may  extend 
the  payment  of  the  principal  secured  by  said  bond  and  mortgage,  and  any  ex- 
tension so  granted  shall  be  deemed  made  in  pursuance  of  this  agreement  and 
not  to  be  a  modification  thereof. 

Payments  of  the  amounts  to  be  secured  by  the  bonds  to  be  given  hereunder 
are  to  be  guaranteed  by  

IN  WITNESS  WHEREOF,  the  parties  hereto  have  signed  and  sealed  these 
presents  the  day  and  year  first  above  written. 

[L.S.] 

[L.S.] 

[L.S.] 

(ACKNOWLEDGMENTS) 

SCHEDULE  A 

Annexed  hereto  and  forming  a  part  of  the  foregoing  agreement. 
(Description  of  property  sold.) 

SCHEDULE  B 

Annexed  hereto  and  forming  a  part  of  the  foregoing  agreement 
(Description  of  building  to  be  erected) 

SCHEDULE  C 

Annexed  hereto  and  forming  a  part  of  the  foregoing  agreement. 
(At  what  time  and  in  what  amounts  advances  on  mortgage  are  to  be  made.) 


APPENDIX  239 

No.  15 

ACKNOWLEDGMENT— NEW  YORK 

BY  INDIVIDUAL 

STATE  OF  NEW  YORK  ") 

Us.: 
County  of J 

On  this day  of ,  in  the  year before  me  came 

to  me  known  to  be  the  person  described  in,  and  who  executed  the  foregoing 
instrument,  and  acknowledged  that  he  executed  the  same. 


Notary  Public, 
.  County,  No.  , 


No.  16 

ACKNOWLEDGMENT— NEW  YORK 

BY  A  CORPORATION 

STATE  OF  NEW  YORK  ^) 

^ss.: 
County  of J 

On  this day  of in  the  year before  me  came , 

to  me  known,  who,  being  by  me  duly  sworn,  did  depose  and  say  that  he  resides 
in  ;  that  he  is  the  of  the  ,  the  corporation  de- 
scribed in  and  which  executed  the  above  instrument;  that  he  knows  the  seal  of 
said  corporation;  that  the  seal  affixed  to  said  instrument  is  such  corporate  seal; 
that  it  was  so  affixed  by  order  of  the  board  of  directors  of  said  corporation,  and 
that  he  signed  his  name  thereto  by  like  order. 


Notary  Public, 
.  County,  No.  . 


No.  17 

ACKNOWLEDGMENT— NEW  YORK 

BY  SUBSCRIBING  WITNESS 

STATE  OF  NEW  YORK"! 

Us.: 
County  of J 

On  this   day  of before  me  came  the  subscribing 

witness  to  the  foregoing  instrument,  with  whom  I  am  personally  acquainted, 
who,  being  by  me  duly  sworn,  did  depose  and  say,  that  he  resided,  at  the  time 

of  the  execution  of  said  instrument,  and  still  resides  in   ;  that  he  is 

and  then  was  acquainted  with and  knew to  be  the  individual 

described  in,  and  who  executed  the  foregoing  instrument;  and  that  he,  said 
subscribing  witness,  was  present  and  saw  him  execute  the  same;  and  that  he, 
said  witness,  at  the  same  time  subscribed  his  name  as  witness  thereto. 


Notary  Public, 
.  County,  No.  , 


240    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  18 

ACKNOWLEDGMENT— NEW  YORK 

BY  FIRM  BY  ONE  PARTNER 

STATE  OF  NEW  YORK  "I 

Us.: 

County  of J 

On  this day  of ,  before  me  came  ,  to  me  known  to 

be  a  member  of  the  firm  of   and  the  person  described  in  and  who 

executed  the  foregoing  instrument  in  the  firm  name  of and  acknowl- 
edged that  he  executed  the  same  as  the  act  and  deed  of  said  firm  of 


Notary  Public, 
, .  County,  No.  , 


No.  19 

ACKNOWLEDGMENT— NEW  YORK 

BY  HUSBAND  AND  WIFE  KNOWN  TO  THE  OFFICER 

STATE  OF  NEW  YORK"! 

Us.: 

County  of J 

On  this day  of  before  me  came and  , 

his  wife,  severally  known  to  me  to  be  the  persons  described  in,  and  who  exe- 
cuted the  foregoing  instrument,  and  acknowledged  that  they  executed  the  same. 


Notary  Public, 
.  County,  No. 


No.  20 

ACKNOWLEDGMENT  BY  ATTORNEY  IN  FACT- 
NEW  YORK 

STATE  OF  NEW  YORK  ^ 

Lss.: 
County  of J 

On  the day  of ,  nineteen  hundred  and ,  before  me  came 

to  me  known  to  be  the  attorney  in  fact  of the  indi- 
vidual described  in  and  by  ..h..  said  attorney  in  fact  executed  the  foregoing 
instrument,  and  duly  acknowledged  that  ..h..  executed  the  same  as  the  act 
and  deed  of  therein  described,  and  for  the  purpose  therein  men- 
tioned, by  virtue  of  a  power  of  attorney  duly  executed  by  the  said 

dated    and  recorded  in  the  office  of  the  Register  of  the  County  of 

on in  Liber of  Powers  of  Attorney,  page 


Notary  Public. 


APPENDIX  241 

No.  21 

ACKNOWLEDGMENT— NEW  JERSEY 

HUSBAND  AND  WIFE 

STATE  OF  NEW  JERSEY^ 

LSS.: 

County  of J 

BE  IT  REMEMBERED,  that  on  this day  of ,  in  the  year 

of  our  Lord,  one  thousand  nine  hundred  and before  me, 

personally  appeared   and   ,  his  wife,  who,  I  am  satisfied 

the  grantors  mentioned  in  the  within   Indenture,  and  to  whom   I   first 

made  known  the  contents  thereof,   and  they  thereupon    acknowledged 

that signed,  sealed  and  delivered  the  same  as voluntary  act  and 

deed,  for  the  uses  and  purposes  therein  expressed. 


(SEAL)  

Commissioner  for  the  State  of  New  Jersey. 


No.  22 

ACKNOWLEDGMENT— OHIO 

THE  STATE  OF 

COUNTY. 

BE  IT  REMEMBERED,  that  on  this day  of A.  D.  19. .  before  me, 

the  subscriber,  a  in  and  for  said  county,  personally  came  the  above 

named  person   the  Grantor  in  the  foregoing  deed,  and  acknowl- 
edged the  signing  of  the  same  to  be    voluntary  act  and  deed  for  the 

uses  and  purposes  therein  mentioned. 

IN  TESTIMONY  WHEREOF,  I  have  hereunto  sub- 
scribed my  name  and  affixed  my  official  seal  on  the  day 
and  year  last  aforesaid. 


Notary  Public. 
No.  23 

ACKNOWLEDGMENT— MASSACHUSETTS 

COMMONWEALTH  OF  MASSACHUSETTS] 

r 

19.... 

Then   personally   appeared  the   above  named    and   acknowledged 

the  foregoing  instrument  to  be free  act  and  deed,  before  me. 


Justice  of  the  Peace. 
My  commission  expires   ,19. . . . 


242   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  24 

ACKNOWLEDGMENT— CALIFORNIA 

STATE  OF  CALIFORNIA  1 

Us.: 

COUNTY  OF J 

On  this  day  of in  the  year  19 ...  before  me,  a 

Notary  Public  in  and  for  said  county,  personally  appeared  known 

to  me  to  be  the  person.,  whose  name subscribed  to  the  within  instru- 
ment and  ..he.,  acknowledged  to  me  that  ..he.,  executed  the  same. 


No.  25  Notary  Public. 

ACKNOWLEDGMENT—ILLINOIS 

STATE  OF ^ 

Lss.: 

COUNTY  OF J 

I,  ,  a  Notary  Public  in  and  for  said  County,  in  the  State  afore- 
said, DO  HEREBY  CERTIFY  that personally  known  to  me  to  be 

the  same  person. .  whose  name subscribed  to  the. . .  .foregoing  instrument, 

appeared  before  me  this  day  in  person  and  acknowledged  that  signed, 

sealed  and  delivered  the  said  instrument  as  free  and  voluntary  act, 

for  the  uses  and  purposes  therein  set  forth,  including  the  release  and  waiver 
of  the  right  of  homestead. 

GIVEN  under  my  hand  and  notarial  seal,  this  day  of A.  D.  19 


No.  26  Notary  Public. 

ACKNOWLEDGMENT— PENNSYLVANIA 

STATE  OF  PENNSYLVANIA  ^ 

Lss.: 
COUNTY  OF J 

ON  THE  day  of  Anno  Domini  19...,  before  me,  the  sub- 
scriber,    personally  appeared  the  above-named  and 

in  due  form  of  law  acknowledged  the  above  Indenture  to  be  act  and 

deed,  and  desired  the  same  might  be recorded  as  such. 

WITNESS  my  hand  and seal  the  day  and  year  aforesaid. 


No.  27  Notary  Public. 

ACKNOWLEDGMENT  BEFORE  CONSULAR 
OFFICER 

UNITED  STATES  CONSULATE  GENERAL  1  ^ 


. 


I,    f  Consul- of  the  United  States  of  America,    , 

duly  commissioned,  and  qualified,  do  certify  that  on  this day  of  192. .,  be- 
fore me  personally  appeared  in  said ,  to  me  known,  and  known 


APPENDIX  243 

to  me  to  be  the  individual  described  in,  whose  name  is  subscribed  to,  and  who 
executed  the  foregoing  instrument,  and  being  by  me  informed  of  the  contents 

of  said  instrument   duly  acknowledged  to  me  that   executed  the 

same  freely,  and  voluntarily  for  the  uses,  and  purposes  therein  mentioned. 

IN  WITNESS  WHEREOF,  I  have  hereunto  set  my  hand  and  Official  Seal 
the  day,  and  year  last  above  written. 


Consul- of  the 

United  States  of  America  at 


No.  28 

ACKNOWLEDGMENT  BEFORE  FOREIGN 
COMMISSIONER 

REPUBLIC  OF  FRANCE, 


BE  IT  REMEMBERED,  that  on  this.... day  of ,  192..,  at  the 

aforesaid,  before  me  ,  Commissioner  for  the  State  of  ,  resid- 
ing in  said ,  personally  came,  ,  to  me  known  to  be  the  indi- 
vidual described  in  and  who  executed  the  within  instrument,  and  acknowledged 
to  me  that  he  executed  the  same. 

IN  WITNESS  WHEREOF,  I  have  hereunto  set  my  hand,  and  affixed  my 
Official  Seal  the  day  and  year  last  above  written. 


Commissioner  for  the  State  of 
No.  29 

COUNTY  CLERK'S  CERTIFICATE 

STATE  OF 

County  of 

I,  Clerk  of  the  County  of ,  and  also  Clerk  of  the  Supreme 

Court  for  said  County  (said  Court  being  a  Court  of  Record),  DO  HEREBY 

CERTIFY  that  ,  whose  name  is  subscribed  to  the  certificate  of 

proof,  acknowledgment  or  deposition  of  the  annexed  instrument  and  thereon 
written,  was  at  the  time  of  taking  such  proof  or  acknowledgment,  a  NOTARY 

PUBLIC  of  the  State  of in  and  for  said  County  of ,  dwelling 

in  said  County,  commissioned  and  sworn  and  duly  authorized  to  take  the  same. 
And  further,  that  I  am  well  acquainted  with  the  handwriting  of  such  Notary, 
and  verily  believe  that  the  signature  to  said  Certificate  is  genuine,  and  that 
the  said  instrument  is  executed  and  acknowledged  according  to  the  laws  of  the 
State  of  

IN  TESTIMONY  WHEREOF,  I  have  hereunto  set  my  hand  and  affixed  the 
seal  of  the  said  County  and  Court,  this  day  of  ,  19 

.  Clerk. 


244   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 
SPECIMENS  OF  AUCTION  ADVERTISEMENTS 

The  following  are  specimens  of  auction  sale  advertising  used  by  some  of  the 
most  successful  auctioneers. 


<HBA1.  SKTATK  AT  APCT1OX. 


Fediherstone  Farms 

1,500  Acres 
Stock  and  Equipment 

At  Absolute  Auctioi 

Fejitherstone,  Va. 

July- 18, 19  and  2® 

Beginning  at  10  A.  M.  Each  Day 


(orraMlon  Vdrtrtw   ctthtf  «t  tk*  «^l*4rlo»:     Till*   •fflet.   «l« 
u«,     -VVuhlniVon.     P.    C.  .    14TU    A«»m/t.    yteUMMUB*.    V*.,    »r 

LOUISVILLE  REAL  ESTATE  &.  DEVELOPMENT  CO. 

D.  C.  Clarke,  President,  Sales  Agent, 

LOUISVILLE^KY. 


APPENDIX 


245 


HAVE  YOU  $101 

$10  Secures  a  $100  Lot 

HAVE  YOU  $20? 

$20  Secures  a  $200  Lot 

VE  YOU  $30? 

$30  Secures  a  $300  Lot 

tt  fcfe-1*?.  In  M  d>r*-B«l«K»  In  ktontUr  J^moU  *  *% 

}'orfc  City  Byngattw  lots 

EAST  BRONX 
BUNGALOW 

Opposite  Brace  Brown  &  Cotter  Estate*. 

o»  EM*  Tr*mont  Are..  Ea.t  177th  St. 


.  .  - 

Absolute  Auction  Sale 

tt«  HifhMt  Bi<W»r  for  Wh»tev*r  They  M«)-  Brlnf 


OMORROW 


^^r^m^ 


'***  „»««"*,.,-* -» 

**s£&^ 


yi*ZSag3& 

J          -^m**K*\.**'^*i»*-^»ti* 


246   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 


[Study  This  Map 


Absolute  Auction 

To  Close  the  Estate  of 
Stewart  McDou.gall,  Dec'd. 

560 

BROOKLYN 

Subway  Station 

LOTS 

'and 
Tvro-2    Family. '  Brownrtone .. Dwellings 

Fourv-4  iniM  Stwy  Apartment  Houses] 

\vith  Stores;"  Located  on  I 

LOT-  •  Fort  Hamilton  Parkway 

New  Utrecht  Avenue 

8th,  9th  &  10th  Aves. 

and  from  42dto  46th  Sts. 


Buy  and  Build  Within  the 
5-Mile   "Inner   Circle" 


I  "IT    IS   Trffi   FINEST    UNOCCUPIED   TRACT  -IN 

*  BROOKLYN,"  «nici  en  experienced  real  estate  operator^ 
I  he  waa  RIGHT— dead  right!    Note  on  the  map  how 
!  i«  the  same-  dhtaffce  from  City  Hall— 5  mile*—  •*  79th 
t,  Manhattan,  and  SEE  what  land  i»  worth  THERE! 
,  out  TODAY  or  this  evening  and  look  thl.  truly 
ioeal  .property  over.     Not*  the*  payed  itreot.,  not* 
lot  graded  ready  for  the  BUILDER.'   Count  th* 
IT  •chooh  iar  sight  of  th*.  tract." .  See  bow  solidly 
t  ••  bnflt  up  on  all  »W«  with  atprea,  theatre,  aad 
aH  wrtWn  easy  walk.     Look  a*  th«  blflcto  pf 
t  houae»  that  sd)oia  the  lots— one  of  thefn  teid 

be  the  BEST-PAYING  APARTMEH*  HOUSE  in 

*  Protptct  "" 


Port  Hamilton  Parkway  Subway  Station  ef  the 
W**t  End  Lin*.  B.  R-  T.,  rirht  at  the  propwty.    Th* 

6th  Avenu*  Subway  and  El*vat*d  atation  only  thre. 
blooki  «w»y  . 

20  Minutes   to   City   Ball. 
30  Minutes  to  Times  Square. 

Th*   property    U    graded,    with    P««m.nt».    ai 


South  of 


Park. 


fmd  another  such  oppor- 
.tiinlty  for  .the  Jnreator  or  builder,  on  however  lar«e 
Wvnn»U  a  -acalc.  If  you  one*  8*e  this  property  I  KNOW 
you  win  be  among  the  far.rfghted  ones  who  wilt  BUY  at 
(hb  At»olut*  Auction  Sale.  Every  lot  offered  wiU  be  told 
tP  the  highest  bidder; 


Thursday  &  Friday  Evenings,  June  23-24 

in  the  Brooklyn  Academy  of  Music,  at  8  P'.  M. . 
One  Block  from  Flat  bush  and  Atlantic*.  AW.   Station* 

Send  for  Illustrated.  Book  Map 

BRYAN  L.  KENNELLY,  in& 

Real  Estate  Auctioneer 

149  Broadway,  N.  V.         T«l.  Cort  l$47| 


Office  on  Property 
Fort  Hamilton  Parkway  and 
_    44th  Street 


APPENDIX  247 

No.  30 

DEED-NEW  JERSEY 

THIS  DEED,  made  this  day  of ,  in  the  year  One  Thousand 

Nine  Hundred  and 

BETWEEN  ,  of  the  of ,  in  the  County  of 

,  and  State  of ,  of  the  First  Part; 

And  ,  of  the  of  ,  in  the  County  of  , 

and  State  of ,  of  the  Second  Part: 

WITNESSETH,  That  the  said  Part. .  of  the  First  Part,  for  and  in  considera- 
tion of  the  sum  of lawful  money  of  the  United  States  of  America, 

to in  hand  paid  by  the  said 

Part. .  of  the  Second  Part,  at  or  before  the  ensealing  and  delivery  of  these 
presents,  the  receipt  whereof  is  hereby  acknowledged,  and  the  said  Part.,  of 

the  Part,  heirs,  executors,  and  administrators,  forever  released 

and  discharged  from  the  same,  ha.,  granted,  bargained  and  sold,  and  by  these 

presents  do  grant,  bargain,  sell  and  convey  unto  the  said  Part.,  of  the 

Second  Part,  and  to, heirs  and  assigns  forever, 

ALL certain  lot..,  tract..,  and  parcel.,  of  land  and  premises,  here- 
inafter more  particularly  described,  situate,  lying-  and  being  in  the  of 

County  of ,  and  State  of  New  Jersey 


TOGETHER,  with  all  and  singular,  the  tenements,  hereditaments  and  ap- 
purtenances thereunto  belonging  or  in  anywise  appertaining,  and  the  reversion 
and  reversions,  remainder  and  remainders, .rents,  issues  and  profits  thereof; 

AND  ALSO,  all  the  estate,  right;  title,  interest,  property,  possession, 

claim  and  demand  whatsoever,  as  well  in  law  as  in  equity,  of  the  said  Part., 
of  the  First  Part,  of,  in,  and  to  the  same,,  and  every  part  and  parcel  thereof, 
with  the  appurtenances; 

TO  HAVE  AND  TO  HOLD,  the  above  granted,  bargained  and  described 
premises,  with  the  appurtenances,  unto  the  said  Part. .  of  the  Second  Part, 
heirs  and  assigns,  to own  proper  use,  benefit^and  behoof  forever. 

AND  THE  SAID  Part. .  of  the  First  Part for heirs,  exec- 
utors and  administrators  do covenant,  grant  and  agree  to  and  with 

the  said  Part.,  of  the  Second  Part,  heirs  and  assigns,  that  the  said 

Part. .  of  the  First  Part at  the  time  of  the  sealing  and  delivery  of  these 

presents lawfully  seized  of  a  good,  absolute  and 

indefeasible  estate  of  inheritance,  in  fee  simple,  of,  in,  and  to  all  and  singular 

the  above  granted  and  described  premises,  with  the  appurtenances 

and  ha.,  good  right,  full  power  and  lawful  authority  to  grant,  bargain,  sell 
and  convey  the  same  in  manner  aforesaid; 

AND  that  the  said  Part.,  of  the  Second  Part, heirs  and  assigns,  shall 

and  may,  at  all  times  hereafter,  peacefully  and  quietly  have,  hold,  use,  occupy, 
possess  and  enjoy  the  above  granted  premises,  and  every  part  and  parcel 
thereof,  with  the  appurtenances,  without  any  let,  suit,  trouble,  molestation, 

eviction,  or  disturbance  of  the  said  Part. .  of  the  First  Part heirs  or 

assigns,  or  of  any  other  person  or  persons  lawfully  claiming,  or  to  claim  the 
Bame; 


248    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

AND  that  at  time  of  the  sealing  and  delivery  of  these  presents,  the  said 
premises  are  not  encumbered  by  any  mortgage,  judgment,  or  limitation,  or  by 
any  encumbrance,  whatsoever,  by  which  the  title  of  the  said  Part. .  of  the  Second 
Part,  hereby  made  or  intended  to  be  made,  for  the  same,  can  or  may  be 
changed,  charged,  altered  or  defeated  in  any  way  whatsoever; 

AND  ALSO,  that  the  said  Part. .  of  the  First  Part,  and heirs,  and  all 

and  every  person  or  persons  whomsoever  lawfully  or  equitably  deriving  any 
estate,  right,  title,  or  interest,  of,  in,  or  to  the  hereinbefore  granted  premises, 

by,  from,  under,  or  in  trust  for shall  and  will,  at  any  time  or  times 

hereafter,  upon  the  reasonable  request  of  the  said  Part. .  of  the  Second  Part, 

heirs  and  assigns,  but  at  the  proper  cost  and  charges  in  the  law  of  the 

said  Part.,  of  the  First  Part, heirs,  executors  and  administrators,  make, 

do  and  execute,  or  cause  to  be  made,  done  and  executed,  all  and  every  such 
further  and  other  lawful  and  reasonable  acts,  conveyances  and  assurances  in 
the  law,  for  the  better  and  more  effectually  vesting  and  confirming  the  premises 
hereby  granted,  or  so  intended  to  be,  in  and  to  the  said  Part. .  of  the  Second 

Part,  heirs  and  assigns,  forever,  as  by  the  said  Part.,  of  the  Second 

Part,  heirs  or  assigns,  or  counsel  learned  in  the  law,  shall  be 

reasonably  advised  or  required; 

AND  ALSO,  that 

will  WARRANT,  SECURE  AND  FOREVER  DEFEND  the  said  land  and 

premises  unto  the  said  

heirs  and  assigns,  forever,  against  the  lawful  claims  and  demands  of  all  and 
every  person  or  persons,  and  from  all  manner  of  encumbrances  whatsoever. 

IN  WITNESS  WHEREOF,  the  said  Part.,  of  the  First  Part  ha.,  hereunto 
set hand.,  and  seal.,  the  day  and  year  first  above  written. 

Signed,  Sealed  and  Delivered 
in  the  presence  of 


(ACKNOWLEDGMENT) 
No.  31 

WARRANTY  DEED— CALIFORNIA 

THIS  INDENTURE,  made  the   day  of  in  the  year  of  our 

Lord  one  thousand  nine  hundred  and 

BETWEEN    

the  part.,  of  the  second  part,  WITNESSETH:  That  the  said  part.,  of  the  first 

part  for  and  in  consideration  of  the  sum  of dollars,  of  the 

United  States  of  America,  to  in  hand  paid  by  the  said  part.,   of  the 

second  part,  the  receipt  whereof  is  hereby  acknowledged,  do. .  by  these  presents 
grant,  bargain,  sell,  convey  and  confirm  unto  the  said  part. .  of  the  second  part, 
and  to heirs  and  assigns  forever 


TOGETHER  with  all  and  singular  the  tenements,  hereditaments  and  appur- 
tenances thereunto  belonging,  or  in  anywise  appertaining,  and  the  rents,  issues 
and  profits  thereof; 


APPENDIX  249 

TO  HAVE  AND  TO  HOLD,  all  and  singular  the  abeve  mentioned  and 
described  premises  together  with  the  appurtenances  unto  the  said  part. .  of  the 

second  part,  and  to  heirs  and  assigns  forever.  And  the  said  part.,  of 

the  first  part,  and  heirs,  the  said  premises  in  the  quiet  and  peaceable 

possession  of  the  said  part.,  of  the  second  part,  heirs  and  assigns, 

against  the  said  part.,  of  the  first  part,  and  heirs,  and  against  all  and 

every  person  and  persons  whomsoever,  lawfully  claiming  or  to  claim  the  same, 
shall  and  will  WARRANT,  and  by  these  presents  forever  DEFEND. 

IN  WITNESS  WHEREOF,  the  said  part.,  of  the  first  part  ha.,  hereunto 
set  hand.,  and  seal.,  the  day  and  year  first  above  written. 

Signed,  Sealed  and  Delivered 
in  the  presence  of 

[L.S.] 

[L.S.] 

(ACKNOWLEDGMENT) 


No.  32 

FEE  SIMPLE  DEED— PENNSYLVANIA 

THIS  INDENTURE,  made  the   day  of  in  the  year  of  our 

Lord  nineteen  hundred  and   

BETWEEN  of  the  second  part: 

WITNESSETH,  That  the  said  part.,  of  the  first  part,  for  and  in  consideration 

of  the  sum  of Dollars,  lawful  money  of  the  United  States  of  America, 

well  and  truly  paid  by  the  said  part. .  of  the  second  part  to  the  said  part. .  of  the 
first  part,  at  and  before  the  sealing  and  delivery  of  these  presents,  the  receipt 

whereof  is  hereby  acknowledged,    granted,   bargained,   sold,   aliened, 

enfeoffed,  released,  conveyed  and  confirmed,  and  by  these  presents  do.,  grant, 
bargain,  sell,   alien,  enfeoff,   release,  convey  and  confirm  unto  the  said  part.. 

of  the  second  part, heirs  and  assigns. 

ALL 


TOGETHER  with  all  and  singular  the  tenements,  hereditaments  and  ap- 
purtenances to  the  same  belonging,  or  in  anywise  appertaining,  and  the  rever- 
sion and  reversions,  remainder  and  remainders,  rent,  issues,  and  profits  thereof; 
AND  ALSO,  all  the  estate,  right,  title,  interest,  property,  claim  and  demand 
whatsoever,  both  in  law  and  equity,  of  the  said  part.,  of  the  first  part,  of,  in, 
to  or  out  of  the  said  premises,  and  every  part  and  parcel  thereof 

TO  HAVE  AND  TO  HOLD  the  said  premises,  with  all  and  singular  the 

appurtenances,  unto  the  said  part. .  of  the  second  part, heirs  and  assigns, 

to  and  for  the  only  proper  use  and  behoof  of  the  said  part. .  of  the  second  part, 
heirs  and  assigns  forever,  

AND  the  said    heirs,  executors  and  administrators,  do.,   by 

these  presents,  covenant,  grant  and  agree  to  and  with  the  said  part.,   of  the 

second  part, heirs  and  assigns,  that  the  said heirs  all  and 

singular  the  hereditaments  and  premises  hereinabove  described  and  granted  or 
mentioned,  and  intended  so  to  be,  with  the  appurtenances,  unto  the  said  part., 
of  the  second  part, heirs  and  assigns,  against  the  said  part.,  of  the  first 


250    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

part  and heirs,  and  against  all  and  every  other  person  or  persons  whom- 
soever, lawfully  claiming  or  to  claim  the  same  or  any  part  thereof, shall 

and  will  by  these  presents  WARRANT  AND  FOREVER  DEFEND. 

IN  WITNESS  WHEREOF,  the  said  part.,   of  the  first  part  ha.,   hereunto 
set hand.,  and  seal.,  the  day  and  year  first  above  written. 

Signed,  sealed  and  delivered  [L.  S.] 

in  the  presence  of  us :  [L.  S.] 

[L.S.] 

[L.S.] 

[L.S.] 

[L.S.] 

RECEIVED  the  day  of  the  date  of  the  within  or  foregoing  Indenture,  of  the 

said  part.,   of  the  second  part,  the  sum  of  

WITNESS 


(ACKNOWLEDGMENT) 
No.  33 

WARRANTY  DEED— MASSACHUSETTS 

KNOW  ALL  MEN  BY  THESE  PRESENTS  that in  consideration 

of paid  by  the  receipt  whereof  is  hereby  acknowledged, 

do  hereby  give,  grant,  bargain,  sell  and  convey  unto  the  said , 

all    

TO  HAVE  AND  TO  HOLD  the  granted  premises,  with  all  the  privileges 

and  appurtenances  thereto  belonging,  to  the  said  and  heirs 

and  assigns,  to  their  own  use  and  behoof  forever. 

AND  hereby  for  and  heirs,  executors,  and  administra- 
tors, COVENANT  with  the  grantee. .  and heirs  and  assigns,  that 

lawfully  seized  in  fee-simple  of  the  granted  premises;  that  they  are  free  from 

all  incumbrances ;  that have  good  right  to  sell  and  convey  the  same  as 

aforesaid ;  and  that will  and heirs,  executors,  and  administrators 

shall  WARRANT  AND  DEFEND  the  same  to  the  grantee.,  and  heirs 

and  assigns  forever  against  the  lawful  claims  and  demands  of  all  persons. 

AND   for  the  consideration   aforesaid    

do  hereby  release  unto  the  said  grantee. .  and heirs  and  assigns  all  right 

of  or  to  both  DOWER  AND  HOMESTEAD  in  the  granted  premises,  and  all 
other  rights  and  interests  therein. 

IN  WITNESS  WHEREOF the  said hereunto  set 

hand.,  and  seal.,  this day  of in  the  year  one  thousand  nine 

hundred  and  

Signed  and  sealed  in  the  presence  of 


(ACKNOWLEDGMENT) 


APPENDIX  251 

No.  34 

DEED,  STATUTE  FORM— MASSACHUSETTS 


of  ,  County,  Massachusetts,  being  unmarried,  for  considera- 
tion paid,  grant  to  of  with  WARRANTY  COVE- 
NANTS    the  land  in  

(Description  and  encumbrances,  if  any) 


wife  of  said  grantor release  to  said  grantee  all  rights  of 

dower  and  homestead  and  other  interests  therein. 

WITNESS  hand.,  and  seal.,  this day  of 19.... 


(ACKNOWLEDGMENT) 

(The  following  is  not  a  part  of  the  deed,  and  is  not  to  be  recorded.) 
EXTRACT  FROM  CHAPTER  502,  SECTION  2,  ACTS  OF  1912. 
Every  deed  in  substance  in  the  above  form,  when  duly  executed,  shall  have 
the  force  and  effect  of  a  deed  in  fee  simple  to  the  grantee,  his  heirs  and  assigns, 
to  his  and  their  own  use,  with  covenants  on  the  part  of  the  grantor  for  himself, 
his  heirs,  executors,  administrators  and  successors,  with  the  grantee,  his  heirs, 
successors  and  assigns,  that  at  the  time  of  the  delivery  of  such  deed,  (1)  he 
was  lawfully  seized  in  fee  simple  of  the  granted  premises,  (2)  that  the  granted 
premises  were  free  from  all  encumbrances,  (3)  that  he  had  good  right  to  sell 
and  convey  the  same  to  the  grantee  and  his  heirs  and  assigns,  and  (4)  that  he 
will  and  his  heirs,  executors  and  administrators  shall  warrant  and  defend  the 
same  to  the  grantee  and  his  heirs  and  assigns  against  the  lawful  claims  and 
demands  of  all  persons. 


No.  35 

WARRANTY  DEED— OHIO 

KNOW  ALL  MEN  BY  THESE  PRESENTS :  


of  the of ,  County  of and  State  of ,  in  con- 
sideration of  the  sum  of Dollars,  to paid  by of 

the of ,  County  of and  State  of ,  the  receipt 

whereof  is  hereby  acknowledged,  do.,  hereby  GRANT,  BARGAIN,  SELL  AND 

CONVEY  to  the  said  ,  h..   heirs  and  assigns  forever,  the  following 

REAL  ESTATE,  situated  in  the  County  of in  the  State  of , 

and  in  the of and  bounded  and  described  as  follows: 


252    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

TO   HAVE  AND   TO    HOLD    said  premises,   with   all   the   privileges   and 

appurtenances  thereunto  belonging,  to  the  said ,  h..  heirs  and  assigns 

forever. 

And  the  said  for  and heirs  do.,   hereby  covenant 

with  the  said h..  heirs  and  assigns,  that lawfully  seized 

of  the  premises  aforesaid ;   that  the   said  premises   are   FREE  AND   CLEAR 
FROM  ALL  INCUMBRANCES  WHATSOVER. 

and  that   will  forever  WARRANT  AND  DEFEND  the   same,  with 

the  appurtenances  unto  the  said   ,  h..  heirs  and  assigns  against  the 

lawful  claims  of  all  persons  whatsoever 

IN  WITNESS  WHEREOF,  The  said who  hereby  release 

right  of  dower  in  the  premises,  h..  hereunto  set hand..,  this 

day  of  ,19..,  

Signed  and  acknowledged  in 
presence  of 


(ACKNOWLEDGMENT) 

No.  36 

EXAMPLES  OF  RESTRICTIVE  COVENANTS 

That  neither  the  said  party  of  the  second  part  nor  the  heirs,  successors  or 
assigns  of  the  party  of  the  second  part  shall  or  will  erect,  suffer  or  permit, 
maintain  or  carry  on  upon  said  premises  or  any  part  thereof  any  slaughter 
house,  blacksmith  shop,  forge,  foundry  or  furnace,  or  any  manufactory  or  fac- 
tory of  any  kind  or  nature  whatsoever,  or  any  tannery  or  other  factory  for  the 
manufacture,  preparation  or  treatment  of  skins,  hides  or  leather,  or  any  brew- 
ery, malt  house  or  distillery,  or  any  building  or  other  structure  for  the  manu- 
facture of  any  malt  or  spirituous  or  distilled  liquors,  or  to  be  used  for  the 
carrying  on  of  any  noxious,  dangerous  or  offensive  trade  or  business,  or  any 
hotel  or  boarding  or  community  house,  or  any  building  to  be  used  as  a  hospital 
for  the  care  or  treatment  of  any  disease  either  of  persons  or  animals,  or  any 
asylum  for  the  care  or  treatment  of  the  insane,  nor  shall  said  premises  be  used 
for  a  cemetery. 

That  neither  the  said  party  of  the  second  part  nor  the  heirs,  successors  or 
assigns  of  the  party  of  the  second  part  shall  or  will  erect,  or  cause  or  suffer 
to  be  erected,  or  use  or  cause  or  suffer  to  be  used  on  any  portion  of  said  prem- 
ises any  building  except  a  dwelling  house  for  one  family  only,  which  building 
shall  cost  to  erect,  at  least  Three  thousand  ($3,000)  Dollars,  and  which  building 
shall  not  have  a  roof  of  the  character  or  description  commonly  known  as  a  flat 
roof. 

That  neither  the  said  party  of  the  second  part,  nor  the  heirs,  successors  or 
assigns  of  the  party  of  the  second  part  shall  or  will  erect  or  cause  or  suffer 
to  be  erected,  or  use  or  cause  or  suffer  to  be  used  on  any  portion  of  said 

premises  more  than  one  building  on  each  plot  of  land,  at  least feet  front 

and  rear  by  100  feet  in  depth  on  each  side;  and  no  building  or  structure  of 
any  kind  or  nature  shall  be  erected,  suffered  or  permitted  to  be  erected  or  used 
within  15  feet  of  the  building  line  of  any  Street,  Avenue  or  Parkway,  nor 


APPENDIX  253 

within  15  feet  of  the  rear  line  of  any  of  said  plots,  nor  within feet  of 

the  side  lines  of  said  plot.  This  covenant  as  to  a  set  back  shall  not  apply  to 
front  or  side  or  rear  steps,  side  porches  or  piazzas,  cornices,  bay  or  oriel  win- 
dows, upon  houses  erected  in  accordance  with  the  above  restrictions. 

That  neither  the  said  party  of  the  second  part  nor  the  heirs,  successors  or 
assigns  of  the  party  of  the  second  part  shall  or  will  manufacture  or  sell  or 
cause  or  permit  to  be  manufactured  or  sold  or  kept  for  sale  on  any  portion  of 
the  premises  hereby  conveyed  any  goods  or  merchandise  of  any  kind  and  will 
not  carry  on  or  cause  or  permit  to  be  carried  on,  any  trade  or  business  whatso- 
ever upon  any  part  of  said  premises. 

That  neither  the  said  party  of  the  second  part  nor  the  heirs,  successors  or 
assigns  of  the  party  of  the  second  part  shall  or  will  construct  or  permit  upon 
any  portion  of  said  premises  any  tight  board  or  close  built  fence  whatsoever, 
nor  any  fence  nearer  the  street  line  on  which  said  house  fronts  than  the  front 
wall  of  the  house,  excepting  that  a  hedge  may  be  placed  in  front  on  the  build- 
ing line,  provided,  however,  that  no  fence  or  hedge  whatsoever  shall  be  per- 
mitted of  a  greater  height  than  four  feet. 

And  the  party  of  the  second  part  for  the  party  of  the  second  part  and  the 
heirs,  successors  and  assigns  of  the  party  of  the  second  part  further  covenants 
that  the  property  conveyed  by  this  deed'  shall  be  subject  to  an  annual  charge 
in  such  an  amount  as  will  be  fixed  by  the  party  of  the  first  part,  its  successors 
and  assigns  not,  however,  exceeding  in  any  year  the  sum  of  Four  ($4.00)  Dol- 
lars per  lot  20  x  100  feet.  The  assigns  of  the  party  of  the  first  part  may  in- 
clude a  Property  Owners'  Association  which  may  hereafter  be  organized  for 
the  purposes  referred  to  in  this  paragraph,  and  in  case  such  association  is 
organized,  the  sums  in  this  paragraph  provided  for  shall  be  payable  to  such 
association.  The  party  of  the  second  part  for  the  party  of  the  second  part 
and  the  heirs,  successors  and  assigns  of  the  party  of  the  second  part  covenants 
that  they  will  pay  this  charge  to  the  party  of  the  first  part,  its  successors  and 
assigns  on  the  first  day  of  May  in  each  and  every  year,  and  further  covenants 
that  said  charge  shall  on  said  date  in  each  year  become  a  lien  on  the  land  and 
shall  continue  to  be  such  lien  until  fully  paid.  Such  charge  shall  be  payable 
to  the  party  of  the  first  part  or  its  successors  or  assigns,  and  shall  be  devoted 
to  the  maintenance  of  the  roads,  paths,  parks,  beach,  sewers,  and  such  other 
public  purposes  as  shall  from  time  to  time  be  determined  by  the  party  of  the 
first  part,  its  successors  or  assigns.  And  the  party  of  the  second  part  by  the 
acceptance  of  this  deed  hereby  expressly  vests  in  the  party  of  the  first  part,  its 
successors  and  assigns,  the  right  and  power  to  bring  ?J1  actions  against  the 
owner  of  the  premises  hereby  conveyed  or  any  part  thereof  for  the  collection 
of  such  charge  and  to  enforce  the  aforesaid  lien  therefor. 

These  covenants  shall  run  with  the  land  and  shall  be  construed  as  real  cove- 
nants running  with  the  land  until  January  31st,  1940,  when  they  shall  cease 
and  determine.  Except,  however,  it  is  mutually  understood  and  agreed  that 
the  above  covenants  and  restrictions  or  any  of  them  may  be  altered,  modified 
or  annulled  at  any  time  prior  to  said  January  31st,  1940,  by  written  agreement 
by  and  between  the  Neponsit  Realty  Company,  its  successors  or  assigns,  and  the 
owner  for  the  time  being  of  the  premises  upon  which  it  is  agreed  to  alter, 
modify  or  annul  said  covenants  and  restrictions  and  such  agreement  shall  be 
effectual  to  alter,  modify  or  annul  such  covenants  and  restrictions  as  to  such 
premises  without  the  consent  of  the  owner  or  owners  of  any  adjacent  premises. 
Nothing  herein  contained  shall  be  construed,  nor  shall  there  be  any  obligation 
upon  the  party  of  the  first  part,  its  successors  or  assigns,  to  restrict  in  any 
manner  any  other  property  shown  upon  said  map  now  or  hereafter  owned 
by  the  party  of  the  first  part,  its  successors  or  assigns, 


254   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  37 

MORTGAGE— NEW  JERSEY 

THIS  INDENTURE,  made  the  day  of ,  in  the  year  one 

thousand  nine  hundred  and 

BETWEEN  party  of  the  first  part  and  part.,  of  the 

second  part; 

WHEREAS,  the  said  justly  indebted  to  the  said  part.,  of  the 

second  part  in  the  sum  of dollars,  lawful  money  of  the  United  States 

of  America,  secured  to  be  paid  by certain  bond  or  obligation,  bearing 

even  date  with  these  presents,  in  the  penal  sum  of  dollars,  lawful 

money  as  aforesaid,  conditioned  for  the  payment  of  the  said  first  mentioned 

sum  of  dollars,  lawful  money  as  aforesaid,  to  the  said  part.,  of  the 

second  part, or  assigns,  on  the day  of which  will  be  in 

the  year  one  thousand  nine  hundred  and  and  interest  thereon,  to  be 

computed  from  the day  of one  thousand  nine  hundred  and 

at  and  after  the  rate  of per  cent  per  annum,  and  to  be  paid 

AND  IT  IS  HEREBY  EXPRESSLY  AGREED,  that  should  any  default  be 

made  in  the  payment  of  the  said  interest  or  of  any  part  thereof,  on 

any  day  whereon  the  same  is  made  payable,  as  above  expressed,  or  should  any 
tax,  assessment,  water  rent,  or  other  municipal  or  governmental  rate,  charge, 
imposition  or  lien  be  hereafter  imposed  or  acquired  upon  the  premises  described 
in  this  mortgage,  and  become  due  and  payable,  and  should  the  said  interest 

remain  unpaid  and  in  arrear  for  the  space  of  or  said  tax, 

assessment,  water  rent,  or  other  municipal  or  governmental  rate,  charge,  im- 
position or  lien,  or  any  or  either  of  them,  remain  unpaid  and  in  arrear 

for  the  space  of then  and  from  thenceforth,  that  is  to  say,  after  the 

lapse  or  expiration  of  either  of  the  said  periods,  as  the  case  may  be,  the  afore- 
said principal  sum  of with  all  arrearage  of  interest  thereon,  shall,  at 

the  option  of  the  said  part.,  of  the  second  part  or  legal  representa- 
tives, become  and  be  due  and  payable  immediately  thereafter,  although  the 
period  above  limited  for  the  payment  thereof  may  not  then  have  expired,  any- 
thing therein  before  contained  to  the  contrary  thereof  in  anywise  notwith- 
standing; as  by  said  bond  or  obligation,  and  the  condition  thereof,  reference 
being  thereunto  had,  may  more  fully  appear. 

NOW  THIS  INDENTURE  WITNESSETH,  that  the  said  part.,  of  the  first 
part,  for  the  better  securing  the  payment  of  the  said  sum  of  money  mentioned 
in  the  condition  of  the  said  bond  or  obligation,  with  interest  thereon,  according 
to  the  true  intent  and  meaning  thereof,  and  also  for  and  in  consideration  of  the 

sum  of  one  dollar,  to  in  hand  paid  by  the  said  part.,  of  the  second 

part,  at  or  before  the  ensealing  and  delivery  of  these  presents,  the  receipt 
whereof  is  hereby  acknowledged,  ha.,  granted,  bargained,  sold,  aliened,  re- 
leased, conveyed  and  confirmed,  and  by  these  presents  do.,  grant,  bargain,  sell, 
alien,  release,  convey  and  confirm,  unto  the  said  part. .  of  the  second  part,  and 
to  forever,  ALL  


TOGETHER  with  all  and  singular  tenements,  hereditaments  and  appurten- 
ances thereunto  belonging  or  in  anywise  appertaining,  and  the  reversion  and 
reversions,  remainder  and  remainders,  rents,  issues  and  profits  thereof: 

AND  ALSO  all  the  estate,  right,  title,  interest,  property,  possession,  claim 
and  demand  whatsoever,  as  well  in  law  as  in  equity,  of  the  said  part. .  of  the 
first  part,  of,  in  and  to  the  same  and  every  part  and  parcel  thereof,  with  the 


APPENDIX  255 

appurtenances,  TO  HAVE  AND  TO  HOLD  the  above  granted  and  described 

premises,  with  the  appurtenances,  unto  the  said  part. .  of  the  second  part, 

assigns  to own  proper  use,  benefits  and  behoof  forever. 

PROVIDED  ALWAYS,  and  these  presents  are  upon  this  express  condition, 
that  if  the  said  part.  .  of  the  first  part,. .  .heirs,  executors  or  administrators,  shall 
well  and  truly  pay  unto  the  said  part.  .  of  the  second  part,. . .  .or  assigns  the  said 
sum  of  money  mentioned  in  the  condition  of  the  said  bond  or  obligation,  and 
the  interest  thereon,  at  the  time  and  times  and  in  the  manner  mentioned  in  the 
said  condition,  according  to  the  true  intent  and  meaning  thereof,  that  then  these 
presents,  and  the  estate  hereby  granted,  shall  cease,  determine  and  be  void. 

AND  THE  SAID  for heirs,  executors  and  administrators, 

tlo..  covenant  and  agree  to  pay  unto  the  said  part.,  of  the  second  part, 

or  assigns,  the  said  sum  of  money  and  interest,  as  mentioned  above  and  ex- 
pressed in  the  condition  of  the  said  bond. 

AND  IT  IS  ALSO  AGREED  by  and  between  the  parties  to  these  presents, 
that  the  said  part.,  of  the  first  part  shall  and  will  keep  the  buildings  erected, 
and  to  be  erected,  upon  the  lands  above  conveyed,  insured  against  loss  or  dam- 
age by  fire,  by  insurers,  and  in  an  amount  approved  by  the  said  part.,  of  the 

second  part  or  assigns,  and  assign  the  policy  and  certificates  thereof 

to  the  said  part.,  of  the  second  part;  and  in  default  thereof,  it  shall  be  lawful 
for  the  said  part.,  of  the  second  part  to  effect  such  insurance,  and  the  premium 
or  premiums,  paid  for  effecting  the  same  shall  be  a  lien  on  the  said  mortgaged 
premises,  added  to  the  amount  of  the  said  bond  or  obligation,  and  secured  by 

these  presents,  payable  on  demand  with  interest  at  the  rate  of per  cent 

per  annum,  from  time  of  payment  of  such  premiujn  or  premiums. 

AND  THE  SAID  the  owner  of  the  lands  above  described,  for 

heirs  and  assigns,  do. .  further  covenant  and  agree  to  and  with  the  said 

part. .  of  the  second  part, and  assigns,  that they  will  not  here- 
after apply  for  any  deduction  by  reason  of  any  mortgage  from  the  taxable 
value  of  the  lands  embraced  in  this  mortgage.  AND  IT  IS  FURTHER 

AGREED,  that  in  case  the  said  owner heirs  or  assigns,  shall  claim  any 

deduction  from  the  taxable  value  of  the  said  lands  in  violation  of  this  agree- 
ment, then  and  in  that  case  this  mortgage  shall  become  and  be  immediately  due 
and  payable,  and  the  amount  of  tax  paid  by  the  mortgagee.,  shall  be  added 
to  the  principal  of  the  debt  secured  hereby  and  recoverable  therewith,  with 
interest  thereon  from  the  time  of  payment. 

IN  WITNESS  WHEREOF,  the  said  part.,  of  the  first  part  ha.,  hereto  set 
hand  and  seal. .  the  day  and  year  first  above  written. 

SEALED  AND  DELIVERED  IN  THE  PRESENCE  OF 


(ACKNOWLEDGMENT), 
No.  38 

MORTGAGE— CALIFORNIA 

THIS  MORTGAGE,  Made  the day  of in  the  year  nineteen 

hundred  and by Mortgagor. .,  to Mort- 
gagee..., WITNESSETH:  That  the  Mortgagor.,  mortgage.,  to  the  Mort- 
gagee. .  all  that  real  property  situate  in  the  ,  County  of 

State  of  California,  and  known,  designated  and  described  as   


256    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

Together  with  all  the  improvements  thereon,  and  the  hereditaments  and  ap- 
purtenances thereunto  belonging,  and  the  rents,  issues  and  profits  thereof,  as 
security  for  the  payment  to  said  Mortgagee.,  of  a  certain  promissory  note,  in 
the  words  and  figures  following: 

$ ,  California,   19... 

after  date,  for  value  received   promise  to  pay  to 

or  order,   Dollars,  in  gold  coin  of  the  present  standard 

of  value,  with  interest  thereon  from  date  until  paid,  at  the  rate  of   per 

cent  per in  like  coin,  payable  . . and  if  not  so  paid,  the  interest 

may  be  added  to  the  principal  and  bear  like  interest,  and  the  whole  note  may 
at  the  option  of  the  holder..,  without  notice  to  the  maker.,  thereof,  be  treated 
as  due  and  collectible.  Both  principal  and  interest  to  be  paid  at  the  office  of 


and  also  to  secure  all  other  indebtedness  that  may  hereafter,  during  the  con- 
tinuance of  this  mortgage,  be  due,  owing  or  existing  from  said  Mortgagor.. 

to  said  Mortgagee   

AND  IT  IS  HEREBY  FURTHER  AGREED,  That  the  Mortgagor.,  shall 
and  will  keep  the  improvements  upon  the  mortgaged  premises  insured  for 

and  will  have  such  insurance  made  payable  to  the  mortgagee.,    as 

additional  security  for  the  payment  of  the  note  aforesaid ;  and  in  default  of 
keeping  said  improvements  insured  as  aforesaid,  then  said  Mortgagee.,  may 
cause  the  same  to  be  insured  at  the  expense  of  said  Mortgagor..;  and  that 
the  Mortgagor.,  will,  on  demand,  repay  to  the  Mortgagee..,  in  gold  coin, 
all  moneys  paid  by  the  Mortgagee.,  to  obtain  said  insurance;  and  also  all  sums 
paid  by  the  Mortgagee..,  to  discharge  any  tax  or  assessment  on  said  premises, 
or  the  improvements  thereon,  not  chargeable  against  the  Mortgagee.,  under 
the  Constitution  and  laws  of  said  State,  which  payments  the  Mortgagee. .  hereby 
authorized  to  make,  and  that  this  mortgage  shall  stand  as  security  for  the 

repayment  to  the  Mortgagee.,   of  all  sums  which   shall  have  paid  for 

the  purposes  aforesaid,  together  with  interest  thereon,  from  the  date  of  the 
payment  thereof,  at  the  rate  of  twelve  per  cent  per  annum,  until  repayment  is 
made  to  the  Mortgagee. .,  and  in  case  it  shall  become  necessary  to  defend  or 
intervene  to  protect  the  title  to  said  property,  or  the  right  to  the  possession 
thereof,  or  the  right  or  lien  of  this  mortgage,  in  any  action  of  ejectment,  suit 
for  partition,  or  to  foreclose  a  lien,  or  any  other  legal  proceeding  whatsoever, 

the  said  Mortgagee.,  or   assigns  may  take  charge  and  control  of  such 

intervention  or  defense,  and  this  mortgage  shall  stand  as  security  for  the  re- 
payment of  all  moneys  expended  in  such  defense  or  intervention,  for  counsel 
fees  or  otherwise,  together  with  interest  thereon  at  the  rate  of  twelve  per  cent 
per  annum. 
And  in  case  default  be  made  in  the  payment  of  said  note,  or  any  installment 

thereof  or  of  any  interest  due  thereon,  then  the  Mortgagee.,  may,  at 

option  and  without  notice  to  the  Mortgagor. .   at  once  proceed  to  foreclose  this 

mortgage,  and  in  any  such  proceeding  to  foreclose  shall  be  allowed  a 

reasonable  and  just  sum,  to  be  fixed  by  the  Court,  with  which  to  pay  the  attor- 
neys' and  counsel  fees  in  such  foreclosure  proceeding,  in  gold  coin;  which  sum 
shall  be  secured  by  this  mortgage  and  shall  become  due  upon  the  filing  of  the 
complaint;  and  upon  filing  of  such  complaint  in  such  foreclosure  proceedings, 
or  at  any  time  thereafter,  the  Court  shall,  if  requested  by  the  plaintiff..,  name 
some  disinterested  person  as  Receiver,  and  shall  authorize  such  Receiver  to 
at  once  take  possession  of  the  mortgaged  premises  and  collect  the  rents  and 
profits  thereof,  and  apply  them  to  the  satisfaction  of  such  judgment,  and  to 
sell  said  premises  in  the  same  manner  as  lands  are  sold  upon  execution,  and 
to  continue  in  the  use  and  possession  of  said  premises,  and  to  collect  the  rents 


APPENDIX  257 

and  profits  thereof,  until  the  premises   are  redeemed  from  such  sale,  or  until 

title  is  vested  in  the  purchaser,  by  the  execution  of  a  conveyance  in  pursuance 

of  the  sale. 

IN  WITNESS  WHEREOF,  the  said  Mortgageor..  ha.,  hereunto  set 

hand.,  and  seal.,  the  day  and  year  first  herein  written. 

[L.S.] 

[L.S.] 

[L.S.] 

[L.S.] 

(ACKNOWLEDGMENT^ 


No.    39 

MORTGAGE— PENNSYLVANIA 

THIS  INDENTURE,  made  the   day  of  in  the  year  of  our 

Lord  one  thousand  nine  hundred  and (19. . . )  BETWEEN  

(hereinafter  called  the  Mortgagor. .)  of  the  one  part,  and   


(hereinafter  called  the  Mortgagee..),  of  the  other  part: 

WHEREAS,  the  said  Mortgagor..,  in  and  by  Obligation.,  or  Writ- 
ing. .  obligatory  under  ....  hand. .  and  seal. .  duly  executed,  bearing  even  date 

herewith,  stand bound  unto  the  said  Mortgagee. .  in  the  sum  of 

lawful  money  of  the  United  States  of  America,  conditioned  for  the  payment  of 

the  just  sum  of  lawful  money  as  aforesaid,  together  with  interest 

thereon,  payable at  the  rate  of per  cent  per  annum, 

without  any  fraud  or  further  delay,  and  for  the  production  to  the  Mortgagee.. 

Executors,  Administrators  or  Assigns,  on  or  before  the  day 

of of  each  and  every  year,  of  receipts  for all  taxes  and  water 

rents  of  the  current  year  assessed  upon  the  mortgaged  premises,  and  also,  from 
time  to  time,  and  at  all  times,  until  payment  of  said  principal  sum,  for  the 

keeping  of  the  building mentioned  in  this  Mortgage  insured  against 

loss  or  damage  by  fire  for  the  benefit  of  the  Mortgagee. .  in  the  sum  of 

PROVIDED,  HOWEVER,  and  it  is  thereby  expressly  agreed,  that,  if  at  any 
time  default  shall  be  made  in  the  payment  of  interest  as  aforesaid  for  the  space 

of days  after  any payment  thereof  shall  fall  due,  or  in 

such  production  to  the  Mortgagee..,  Executors,  Administrators  or 

Assigns,  on  or  before  the  day  of  of  each  and  every  year,  of 

such  receipts  for taxes  and  water  rents  of  the  current  year  assessed 

upon  the  premises  mortgaged,  or  in  the  maintenance  of  such  insurance,  then 

and  in  such  case  the  whole  principal  debt  aforesaid shall,  at  the  option 

of  the  said  Mortgagee Executors,  Administrators or  Assigns, 

become  due  and  payable  immediately,  and  payment  of  said  principal  debt 

and  all  interest  thereon,  may  be  enforced  and  recovered  at  once, 

anything  therein  contained  to  the  contrary  notwithstanding.  AND  PROVIDED 
FURTHER,  however,  and  it  is  thereby  expressly  agreed,  that  if  at  any  time 
thereafter,  by  reason  of  any  default  in  payment,  either  of  said  principal  sum 

at  maturity,  or  of  said  interest,  or  in  the  production  of  said  receipts 

for  taxes  and  water  rents  within  the  time  specified,  or  in  the  main- 
tenance of  such  insurance,  a  writ  of  Fieri  Facias  is  properly  issued  upon  the 
judgment  obtained  upon  said  Obligation,  or  by  virtue  of  said  Warrant  of 
Attorney,  or  a  writ  of  Scire  Facias  is  issued  upon  this  Indenture  of  Mortgage, 


258    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

an  attorney's  commission  for  collection,  viz.: per  cent,  shall  be  payable, 

and  shall  be  recovered  in  addition  to  all  principal  and  interest  then  due,  besides 
costs  of  suit,  and  all  expenses  of  effecting  such  insurance,  as  in  and  by  the  said 
recited  Obligation.,  and  the  Condition.,  thereof,  relation  being  thereunto  had, 
may  more  fully  and  at  large  appear. 

NOW  THIS  INDENTURE  WITNESSETH,  That  the  said  Mortgagor..,  as 

well  for  and  in  consideration  of  the  aforesaid  debt  or  principal  sum  of 

and  for  the  better  securing  the  payment  of  the  same,  with  interest,  unto  the  said 

Mortgagee..,  Executors,  Administrators,   and  Assigns,  in  discharge  of 

the  said  recited  Obligation..,  as  for  and  in  consideration  of  the  further  sum 
of  One  Dollar  unto  in  hand  well  and  truly  paid  by  the  said  Mort- 
gage., at  and  before  the  sealing  and  delivery  hereof,  the  receipt  whereof  is 

hereby  acknowledged granted,  bargained,  sold,  aliened,  enfeoffed, 

released  and  confirmed,  and  by  these  presents grant,  bargain,  sell,  alien, 

enfeoff,  release  and  confirm  unto  the  said  Mortgagee and  Assigns, 

TOGETHER  with  all  and  singular  Ways,  Waters,  Water- 
Courses,  Rights,  Liberties,  Privileges,  Improvements  Hereditaments  and  Ap- 
purtenances whatsoever  thereunto  belonging,  or  in  anywise  appertaining,  and 
the  Reversions  and  Remainders,  Rents,  Issues  and  Profits  thereof. 

TO  HAVE  AND  TO  HOLD  the  said  Hereditaments  and  Premises 

hereby  granted,  or  mentioned  and  intended  to  be  so,  with  the  Appurtenances, 

unto  the  said  Mortgagee    and  Assigns,  to   and   for  the  only 

proper  use  and  behoof  of  the  said  Mortgagee and  Assigns  forever. 

And  the  said  Mortgagor.,  for Heirs,  Executors  and  Administrators,  do.. 

hereby  covenant,  promise  and  agree,  to  and  with  the  said  Mortgagee ,  Ex- 
ecutors, Administrators, and  Assigns,  that  if  the  said  Mortgagor 

Heirs,  Executors  or  Administrators,  shall  neglect  or  refuse  to  keep  up  the  afore- 
said insurance,  it  shall  be  lawful  for  the  said  Mortgagee  Executors, 

Administrators or  Assigns,  to  insure  the  said  building   in  a  sum 

sufficient  to  secure  payment  of  the  said  principal  debt  in  case  of  fire,  and  all 
costs  and  expenses  of  effecting  such  insurance  shall  be  treated  as  part  of  the 
principal  debt  in  a  suit  upon  this  Mortgage. 

PROVIDED  ALWAYS,  nevertheless,  that  if  the  said  Mortgagor Heirs, 

Executors,  Administrators  or  Assigns,  shall  and  do  well  and  truly  pay,  or  cause 

to  be  paid,  unto  the  said  Mortgagee   Executors,Administrators 

or  Assigns,  the  aforesaid  debt  or  principal  sum  of on  the day. . 

and  time.,  hereinbefore  mentioned  and  appointed  for  payment  of  the  same, 
together  with  interest  as  aforesaid,  and  shall  produce  to  the  said  Mortgagee.. 

Executors,  Administrators or  Assigns,  on  or  before  the 

day  of of  each  and  every  year,  receipts  for  all   taxes  and 

water  rents  of  the  current  year  assessed  upon  the  premises  mortgaged,  without 
any  fraud  or  further  delay,  and  without  any  deduction,  defalcation  or  abate- 
ment to  be  made  of  anything,  herein  mentioned  to  be  paid  or  done,  and  shall 

keep  the  building mentioned  in  this  Mortgage  insured  as  aforesaid, 

then,  and  from  thenceforth,  as  well  this  present  INDENTURE,  and  the  estate 
hereby  granted,  as  the  said  recited  Obligation.,  shall  cease,  determine  and 
become  void,  anything  hereinbefore  contained  to  the  contrary  thereof  in  any- 
wise notwithstanding.  AND  PROVIDED,  ALSO,  that  it  shall  and  may  be 

lawful  for  the  said  Mortgagee Executors,  Administrators   or 

Assigns,  when  as  soon  as  the  principal  debt  or  sum  hereby  secured  shall 
become  due  and  payable  as  aforesaid,  or  in  case  default  shall  be  made  for  the 

space  of days  in  the  payment  of  interest  on  the  said  principal   sum 

after  any payment  thereof  shall  fall  due,    or  in 

case  there  shall  be  default  in  the  production  to  the  said  Mortgagee 

Executors,  Administrators  or  Assigns,  on  or  before  the  day 


APPENDIX  259 

of each  and  every  year,  of  such  receipts  for  taxes  and 

water  rents  of  the  current  year  assessed  upon  the  premises  mortgaged,  or  in 
the  maintenance  of  the  insurance  as  aforesaid,  to  sue  out  forthwith  a  writ  or 
writs  of  Scire  Facias  upon  this  Indenture  of  Mortgage,  and  to  proceed  thereon 
to  judgment  and  execution  for  the  recovery  of  the  whole  of  said  principal  debt, 

and  all  interest  due  thereon,  together  with  an  attorney's  commission 

for  collection,  viz.:   per  cent,  besides  costs  of  suit,  and  all  expenses  of 

effecting  such  insurance,  without  further  stay,  any  law,  usage  or  custom  to  the 
contrary  notwithstanding. 

IN  WITNESS  WHEREOF,  the  said  Mortgagor.,  to  these  presents  

hereunto  set   hand.,   and  seal..     Dated  the  day  and  year  first  above 

written. 

SEALED  AND  DELIVERED 
in  the  presence  of  us 

[L.S.] 

[L.S.] 

(ACKNOWLEDGMENT) 


No.  40 

TRUST  DEED— ILLINOIS 

THIS  INDENTURE  Made  this day  of A.  D.  19. . .,  between 

of  the  of ,  County  of and  State  of 

party  of  the  first  part,  and of  the  of ,  County  of 

and  State  of  ,  party  of  the  second  part,  as  trustee, 

WITNESSETH,  THAT  WHEREAS,  the  said  justly  indebted  upon 

principal  note.,  in  the  sum  of  dollars,  due  with  in- 
terest at  the  rate  of  per  cent  per  annum,  payable  semi-annually,  as 

evidenced  by  interest  note..,  due  ,  all  of  said  notes  bearing 

even  date  herewith  and  being  payable  to  the  order  of at  the  office  of 

or  such  other  place  as  the  legal  holder.,  thereof  may  in  writing  ap- 
point, in  gold  coin  of  the  United  States  of  the  present  standard  of  weight  and 
fineness,  and  bearing  interest  after  maturity  at  the  rate  of  seven  per  cent  per 
annum. 

Each  of  said  notes  is  identified  by  the  certificate  of  the  trustee  thereon 
endorsed. 

NOW,  THEREFORE,  the  said  party  of  the  first  part,  for  the  better  securing 
of  the  said  indebtedness  as  by  the  said  note.,  evidenced,  and  the  performance 
of  the  covenants  and  agreements  herein  contained  on  part  to  be  per- 
formed, and  also  in  consideration  of  the  sum  of  ONE  DOLLAR  in  hand  paid, 

does  CONVEY  AND  WARRANT  unto  the  said  party  of  the  second  part,  

successor  in  trust,  the  following  described  real  estate  situate  in  the  County  of 
and  State  of  .  .  to  wit: 


Together  with  all  the  tenements,  hereditaments  and  appurtenances  there- 
unto belonging  and  the  rents,  issues  and  profits  thereof  and  all  gas  and  electric 
fixtures,  engines,  boilers,  furnaces,  ranges,  heating  and  lifting  apparatus  and 
all  fixtures  now  in  or  that  shall  hereafter  be  placed  in  any  building  now  or 
hereafter  standing  on  said  land,  and  all  the  estate,  right,  title  and  interest  of 
the  said  party  of  the  first  part  of,  in  and  to  said  land,  hereby  expressly  releas- 


260    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

ing  and  waiving  all  rights  under  and  by  virtue  of  the  Homestead  Exemptior 
Laws  of  the  State  of  Illinois;  TO  HAVE  AND  TO  HOLD  the  same  unto  th< 

said  party  of  the  second  part,  successor  in  trust,  FOREVER,  for  th< 

uses  and  purposes,  and  upon  the  trusts  herein  set  forth. 

And  the  said  party  of  the  first  part  does  covenant  and  agree  as  follows 
To  pay  said  indebtedness  and  the  interest  thereon  as  herein  and  in  said  notes 
provided;  to  pay  all  taxes  and  assessments  levied  on  said  premises  as  and 
when  the  same  shall  become  due  and  payable  and  to  keep  all  buildings  at  any 
time  situated  on  said  premises  in  good  repair  and  to  suffer  no  lien  of  mechanics 
or  material  men,  or  other  claim,  to  attach  to  said  premises;  to  pay  all  watei 
taxes  thereon  as  and  when  the  same  shall  become  due  and  payable  and  neithei 
to  do,  nor  suffer  to  be  done,  anything  whereby  the  security  hereby  effected  or 
intended  so  to  be  shall  be  weakened,  diminished  or  impaired;  to  keep  all  build- 
ings which  may  at  any  time  be  situated  upon  said  premises  insured  in  a  com- 
pany or  companies  to  be  approved  by  the  party  of  the  second  part  or  

successor.,  in  trust,  or  the  legal  holder.,  of  said  note..,  against  loss  or  dam- 
age by  fire  for  the  full  insurable  value  of  such  buildings  for  an  amount  nol 
less  than  the  amount  of  the  indebtedness  secured  hereby  and  to  cause  such 
insurance  policies,  with  the  usual  mortgage  clause  attached  or  other  sufficient 
endorsement,  to  be  deposited  with  said  party  of  the  second  part  as  additional 
security  hereunder  and  upon  failure  to  so  secure  and  deposit  such  insurance 

policies,  said  second  party  successor.,  in  trust,  or  the  legal  holder  of 

said  note..,  is  hereby  authorized  to  procure  the  same,  and  all  moneys  which 

may  be  advanced  by  said  party  of  the  second  part,  or successor  in  trust, 

or  by  the  legal  holder.,  of  said  note..,  or  any  of  them,  for  the  aforesaid  pur- 
poses, or  any  of  them,  or  to  remove  encumbrances  upon  said  premises  or  in 
any  manner  protect  the  title  or  estate  hereby  conveyed,  or  expended  in  or  about 
any  suit  or  proceedings  in  relation  thereto,  including  attorneys'  and  solicitors' 
fees,  shall  with  interest  thereon  at  seven  per  cent  per  annum,  become  so  much 
additional  indebtedness  secured  hereby;  but  nothing  herein  contained  shall 

render  it  obligatory  upon  said  party  of  the  second  part,  or  successor.. 

in  trust,  or  the  legal  holder.,  of  said  note..,  or  any  of  them,  to  so  advance  or 
pay  any  such  sums  as  aforesaid. 

In  the  event  of  a  breach  of  any  of  the  aforesaid  covenants  or  agreements,  or 
in  case  of  default  in  payment  of  any  note.,  secured  hereby,  or  in  case  of  de- 
fault in  the  payment  of  one  of  the  installments  of  interest  thereon,  and  such 
default  shall  continue  for  thirty  (30)  days  after  such  installment  becomes  due 
and  payable,  then  at  the  election  of  the  holder.,  of  said  note  or  notes  or  any 
of  them,  the  said  principal  sum  together  with  the  accrued  interest  thereon  shall 
at  once  become  due  and  payable;  such  election  being  made  at  any  time  after 
the  expiration  of  said  thirty  (30)  days  without  notice,  and  thereupon  the  legal 

holder.,  of  said  indebtedness,  or  any  part  thereof,  or  said  trustee,  or  

successor.,  in  trust,  shall  have  the  right  immediately  to  foreclose  this  trust 
deed  and  upon  the  filing  of  a  bill  for  that  purpose,  the  court  in  which  such 
bill  is  filed,  may  at  once  and  without  notice  appoint  a  receiver  to  take  pos- 
session or  charge  of  said  premises  free  and  clear  of  all  homestead  rights  or 
interests,  with  power  to  collect  the  rents,  issues  and  profits  thereof,  during  the 
pendency  of  such  foreclosure  suit  and  until  the  time  to  redeem  the  same  from 
any  sale  made  under  any  decree  foreclosing  this  trust  deed  shall  expire,  and 
in  case  proceedings  shall  be  instituted  for  the  foreclosure  of  this  trust  deed,  all 
expenses  and  disbursements  paid  or  incurred  in  behalf  of  the  complainant,  in- 
cluding reasonable  solicitors'  fees,  outlays  for  documentary  evidence,  stenog- 
raphers' charges,  costs  of  procuring  a  complete  abstract  of  title,  showing  the 
whole  title  to  said  premises,  embracing  such  foreclosure  decree,  shall  be  paid 
by  the  said  party  of  the  first  part,  and  such  fees,  expenses  and  disbursements 


APPENDIX  261 

shall  be  so  much  additional  indebtedness  secured  hereby  and  shall  be  included 
in  any  decree  entered  in  such  proceedings  for  the  foreclosure  of  this  trust 
deed,  and  such  proceedings  shall  not  be  dismissed  or  a  release  hereof  given 
until  all  such  fees,  expenses  and  disbursements  and  all  the  cost  of  such  proceed- 
ings have  been  paid  and  out  of  the  proceeds  of  any  sale  of  said  premises  that 
may  be  made  under  such  decree  of  foreclosure  of  this  trust  deed,  there  shall 
be  paid,  First:  all  the  cost  of  such  suit,  including  advertising,  sale  and  con- 
veyance, attorneys',  solicitors',  stenographers'  and  trustees'  fees,  outlays  for 
documentary  evidence  and  costs  of  such  abstract  and  examination  of  title. 
Second:  All  moneys  advanced  by  the  party  of  the  second  part  or  the  legal 
holder.,  of  said  note..,  or  any  of  them  for  any  other  purpose  authorized  in 
this  trust  deed,  with  interest  on  such  advances  at  seven  per  cent  per  annum. 
Third:  All  the  accrued  interest  remaining  unpaid  on  the  indebtedness  hereby 
secured.  Fourth:  All  of  said  principal  sum  remaining  unpaid.  The  over- 
plus of  the  proceeds  of  sale  shall  then  be  paid  to  said  party  of  the  first  part 
or  to  his  legal  representatives  or  assigns  on  reasonable  request. 

In  case  of  the  default  of  the  payment  of  the  indebtedness  secured  hereby  or 
the  breach  of  any  of  the  covenants  and  agreements  entered  into  on  the  part  of 
the  party  of  the  first  part,  said  party  of  the  first  part  hereby  waives  all  right 
to  the  possession,  income  and  rents  of  said  premises,  and  it  thereupon  shall  be 

lawful  for  the  party  of  the  second  part,  successor.,  in  trust,  to  enter 

into  and  upon  and  take  possession  of  said  premises  and  to  let  the  same  and 
receive  and  collect  all  rents,  issues  and  profits  thereof. 

AND  THE  SAID  PARTY  OF  THE  FIRST  PART  further  agrees  that  in 
case  of  a  foreclosure  decree  and  sale  of  said  premises  thereunder,  all  policies 
of  insurance  provided  for  herein  may  be  re-written  or  otherwise  changed  so 
that  the  interest  of  the  owner  of  the  master's  certificate  of  sale,  under  such 
foreclosure,  shall  be  protected  to  the  same  extent  and  in  like  manner  as  the 
interest  of  the  legal  holder.,  of  the  note.,  herein  described  is  protected  by 
such  policies. 

Upon  full  payment  of  the  indebtedness  aforesaid  and  the  performance  of 
the  covenants  and  agreements  hereinbefore  made  by  the  said  party  of  the  first 
part,  a  reconveyance  of  said  premises  shall  be  made  by  the  said  trustees,  or 

successor.,  in  trust  legal  representatives,  to  said  party  of  the 

first  part  upon  receiving reasonable  charge  therefor,  and  in  case  of  the 

death,  resignation,  absence  or  removal  from  said  County,  or  other  in- 
ability to  act  of  said  trustee,  when  action  hereunder  may  be  required 

by  any  person  entitled  thereto,  then is  hereby  appointed  and  made 

successor.,  in  trust  herein,  with  like  power  and  authority  as  is  hereby  vested 
in  said  trustee. 

"Legal  holder"  referred  to  herein  shall  include  the  legal  holder  or  holders, 
owner  or  owners  of  said  note  or  notes,  or  indebtedness,  or  any  part  thereof,  or 
of  said  master's  certificate  of  sale  and  all  the  covenants  and  agreements  of  the 

said  party  of  the  first  part  herein  shall  extend  to  and  be  binding  upon  

or  heirs,  executors,  administrators  or  other  legal  representatives  and 

assigns. 


WITNESS  the  hand.,  and  seal.,  of  the  said  parry  of  the  first  part,  the  day 
and  year  first  above  written. 

[SEAL] 

[SEAL] 

(ACKNOWLEDGMENT) 


262    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  41 

MORTGAGE— ILLINOIS 

THIS  INDENTURE  WITNESSETH,  That  the  Mortgagor   of  the 

in  the  County  of and  State  of MORTGAGE . .  and 

WARRANT. .  to of  the County  of and  State  of 

to  secure  the  payment  of  certain  promissory  note.,   executed  by 

bearing  even  date  herewith,  payable  to  the  order    


the  following  described  Real  Estate,  to-wit: 


situated  in  the  County  of in  the  State  of  Illinois,  hereby  releasing  and 

waiving  all  rights  under  and  by  virtue  of  the  Homestead  Exemption  Laws  of 
the  State  of  Illinois,  and  all  right  to  retain  possession  of  said  premises  after 
any  default  in  payment  or  breach  of  any  of  the  covenants  or  agreements  herein 
contained. 

BUT  IT  IS  EXPRESSLY  PROVIDED  AND  AGREED,  That  if  default  be 

made  in  the  payment  of  the  said  promissory  note..,  or  of  any  part 

thereof  or  the  interest  thereon,  or  any  part  thereof  at  the  time  and  in  the  man- 
ner above  specified  for  the  payment  thereof,  or  in  case  of  waste  or  non-payment 
of  taxes  or  assessments  on  said  premises,  or  of  a  breach  of  any  of  the  cove- 
nants or  agreements  herein  contained,  then  and  in  such  case,  the  whole  of  said 

principal  sum  and  interest,  secured  by  the  said  promissory  note.,  in 

this  Mortgage  mentioned,  shall  thereupon,  at  the  option  of  the  said  Mortgagee 
heirs,  executors,  administrators,  attorneys  or  assigns,  become  immedi- 
ately due  and  payable:  And  this  Mortgage  may  be  immediately  foreclosed  to 
pay  the  same  by  said  Mortgagee heirs,  executors,  administrators,  attor- 
neys or  assigns:  And  it  shall  be  lawful  for  the  said  Mortgagee  his 

heirs,  executors,  administrators,  attorneys  or  assigns,  to  enter  into  and  upon  the 
premises  hereby  granted,  or  any  part  thereof,  and  to  receive  and  collect  all 
rents,  issues  and  profits  thereof. 

UPON  The  filing  of  any  bill  to  foreclose  this  Mortgage  in  any  Court  having 

jurisdiction  thereof,  such  Court  may  appoint  or  any  proper  person 

receiver,  with  power  to  collect  the  rents,  issues  and  profits  arising  out  of  said 
premises  during  the  pendency  of  such  foreclosure  suit,  and  until  the  time  to  re- 
deem the  same  from  any  sale  that  may  be  made  under  any  decree  foreclosing  this 
Mortgage  shall  expire,  and  such  rents,  issues  and  profits,  when  collected,  may 
be  applied  toward  the  payment  of  the  indebtedness  and  costs  herein  mentioned 
and  described.  And  upon  the  foreclosure  and  sale  of  said  premises,  there  shall 
be  first  paid  out  of  the  proceeds  of  such  sale  all  expenses  of  advertisements, 

selling  and  conveying  said  premises,  and dollars  attorneys'  or  solicitors' 

fees,  to  be  included  in  the  decree,  and  all  moneys  advanced  for  taxes,  assess- 
ments and  other  liens,  then  there  shall  be  paid  the  principal  of  said  note.., 
whether  due  and  payable  by  the  terms  thereof  or  not,  and  the  interest  thereon. 

DATED  This  day  of  A.  D.  19... 

[SEAL] 

[SEAL] 

(ACKNOWLEDGMENT) 


APPENDIX  263 

No.  42 

MORTGAGE—OHIO 

KNOW  ALL  MEN  BY  THESE  PRESENTS: 

That  of  the  County  of  and  State  of  in 

consideration  of  the  sum  of dollars,  to paid  by the  receipt 

whereof  is  hereby  acknowledged,  do.,  hereby  GRANT,  BARGAIN,  SELL 
AND  CONVEY  to  the  said  heirs  and  assigns  forever,  the  follow- 
ing described  Real  Estate,  situate  in  the  County  of  in  the  State  of 

and  in  the and  bounded  and  described  as  follows,  viz.: 


and  all  the  Estate,  Title  and  Interest  of  the  said  grantor  either  in 

Law  or  in  Equity,  of,  in  and  to  the  said  premises,  together  with  all  the  privi- 
leges and  appurtenances  to  the  same  belonging,  and  all  the  rents,  issues  and 
profits  thereof;  to  have  and  to  hold  the  same  to  the  only  proper  use  of  the 

said  grantee   heirs  and  assigns  forever,  and  the  said   for 

and  for  heirs,  executors  and  administrators,  do.,  hereby  cove- 
nant with  the  said  grantee.., heirs  and  assigns,  that the  true 

and  lawful  owner.,  of  the  said  premises,  and  ha.,  full  power  to  convey  the 
same,  that  the  title,  so  conveyed,  is  clear,  free  and  unincumbered ;  and  further, 

that will  warrant  and  defend  the  same  against  all  claim  or  claims  of 

all  persons  whomsoever. 
Provided,  Nevertheless,  that 


It  is  agreed  between  the  parties  hereto  that  said  mortgagors  shall  and  will 
keep  the  building  or  buildings  erected  and  to  be  erected  upon  the  premises  above 
described,  fully  insured  against  loss  by  Fire  and  Tornado,  in  such  Companies 
and  for  such  amounts  as  said  mortgages  and  assigns  shall  approve,  and  shall 
cause  to  be  indorsed  on  such  policy  or  policies  of  insurance  "loss  if  any,  pay- 
able to  as  his  mortgage  interest  may  appear"  and  shall  deliver  the 

same  to  said  mortgagee  and  assigns  to  be  held  as  collateral  security  hereto; 
and  in  default  thereof  it  shall  be  lawful  for  said  mortgagee  or  assigns  to  effect 
such  insurance,  as  mortgagee  or  otherwise,  and  the  premium  or  premiums  paid 
for  effecting  and  continuing  the  same  shall  be  a  further  lien  on  said  mortgaged 
premises  added  to  the  amount  of  said  note  secured  by  these  presents,  and  pay- 
able on  demand  with  8  per  cent  interest. 

Then  these  presents  shall  be  void;  otherwise  to  be  and  remain  in  full  force 
and  virtue. 

IN  WITNESS  WHEREOF,  the  said hereby  release right 

and  expectancy  of  dower  in  said  premises,  ha.,  hereunto  set  hand.. 

this  day  of  in  the  year  of  our  Lord,  one  thousand  nine  hun- 
dred and  

Signed  and  acknowledged  in  presence  of  us: 


(ACKNOWLEDGMENT) 


264    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  43 

MORTGAGE,  STATUTE  FORM— MASSACHUSETTS 


of    County,  Massachusetts,   being   unmarried,   for  consideration   paid, 

grant  to of with  mortgage  covenants,  to  secure  the  payment 

of   dollars  in   years  with   per  centum  interest 

per  annum  payable  semi-annually   as  provided  in   note.,   of 

even  date, the  land  in   

(Description  and  encumbrances,  if  any) 


THIS   MORTGAGE   IS   UPON   THE   STATUTORY   CONDITION, 


for  any  breach  of  which  the  mortgagee  shall  have  the  statutory  power  of  sale. 

wife  of  said  mortgagor  release  to  the  mortgagee  all 

rights  of  dower  and  homestead  and  other  interests  in  the  mortgaged  premises. 
WITNESS  hand.,   and  seal.,  this day  of  19.... 


(ACKNOWLEDGMENT) 

(The  following  is  not  a  part  of  the  mortgage,  and  is  not  to  be  recorded.) 

EXTRACT  FROM  CHAPTER  502,  SECTION  6,  ACTS  OF  1912. 
Every  mortgage  in  substance  in  the  above  form,  when  duly  executed,  shall 
have  the  force  and  effect  of  a  mortgage  deed  to  the  use  of  the  mortgagee  and 
his  heirs  and  assigns,  with  mortgage  covenants  as  defined  in  section  eighteen 
of  this  act,  to  secure  the  payment  of  the  money  or  the  performance  of  any 
obligation  therein  specified; 

(CONDITION) 

Provided,  nevertheless,  except  as  otherwise  specifically  stated  in  the  mort- 
gage, that  if  the  mortgagor,  or  his  heirs,  executors,  administrators,  or  assigns 
shall  pay  unto  the  mortgagee  or  his  executors,  administrators  or  assigns  the 
principal  and  interest  secured  by  the  mortgage,  and  shall  perform  any  obliga- 
tion secured,  at  the  time  provided  in  the  note,  mortgage  or  other  instrument  or 
any  extension  thereof,  and  shall  perform  the  condition  of  any  prior  mortgage, 
and  until  such  payment  and  performance  shall  pay  when  due  and  payable  all 
taxes,  charges  and  assessments,  to  whomsoever  and  whenever  laid  or  assessed, 
whether  on  the  mortgaged  premises  or  on  any  interest  therein,  or  on  the  debt 
or  obligation  secured  thereby;  shall  keep  the  buildings  on  said  premises  insured 
against  fire  in  a  sum  not  less  than  the  amount  secured  by  the  mortgage,  or  as 
otherwise  provided  therein  for  insurance,  for  the  benefit  of  the  mortgagee  and 
his  executors,  administrators  and  assigns  in  such  form  and  at  such  insurance 
offices  as  they  shall  approve,  and  at  least  two  days  before  the  expiration  of 
any  policy  on  said  premises,  shall  deliver  to  him  or  them,  a  new  and  sufficient 
policy  to  take  the  place  of  the  one  so  expiring;  and  shall  not  commit  or  suffer 
any  strip  or  waste  of  the  mortgaged  premises,  or  any  breach  of  any  covenant 
contained  in  the  mortgage  or  in  any  prior  mortgage ;  then  the  mortgage  deed, 
as  also  the  mortgage  note  or  notes,  shall  be  void. 


APPENDIX  265 

(POWER) 

But  upon  any  default  In  the  performance  or  observance  of  the  foregoing 
or  other  condition,  the  mortgagee  or  his  executors,  administrators,  successors 
or  assigns  may  sell  the  mortgaged  premises  or  such  portion  thereof  as  may 
remain  subject  to  the  mortgage  in  case  of  any  partial  release  thereof,  either 
as  a  whole  or  in  parcels,  together  with  all  improvements  that  may  be  thereon, 
by  public  auction  on  or  near  the  premises,  or  at  such  place  as  may  be  designated 
for  that  purpose  in  the  mortgage,  first  complying  with  the  terms  of  the  mort- 
gage and  with  the  statutes  relating  to  the  foreclosure  of  mortgages  by  the  exer- 
cise of  a  power  of  sale,  and  may  convey  the  same  by  proper  deed  or  deeds  to 
the  purchaser  or  purchasers  absolutely  and  in  fee-simple;  and  such  sale  shall 
forever  bar  the  mortgagor  and  all  persons  claiming  under  him  from  all  right 
and  interest  in  the  mortgaged  premises,  whether  at  law  or  in  equity. 

The  foregoing  "condition"  shall  be  known  as  the  Statutory  Condition,  and 
may  be  incorporated  in  any  mortgage  by  reference. 

The  foregoing  "power"  shall  be  known  as  the  Statutory  Power  of  Sale,  and 
may  be  incorporated  in  any  mortgage  by  reference. 

The  parties  may  insert  in  such  mortgage  any  lawful  agreement  or  condition. 


No.  44 

MORTGAGE— MASSACHUSETTS 

KNOW  ALL  MEN  BY  THESE  PRESENTS  that  in  consideration 

of   paid  by the  receipt  whereof  is  hereby  acknowledged,  do 

hereby  give,  grant  bargain,  sell  and  convey  unto  the  said  , 

all    . 


TO  HAVE  AND  TO  HOLD  the  granted  premises,  with  all  the  privileges 

and  appurtenances  thereto  belonging,  to  the  said  and  heirs 

and  assigns,  to  their  own  use  and  behoof  forever. 

And  hereby  for  and  heirs,  executors  and  adminis- 
trators, COVENANT  with  the  grantee  and heirs  and  assigns  that 

lawfully  seized  in  fee  simple  of  the  granted  premises,  that  they  are  free  from  all 

incumbrances  that have  good  right  to  sell  and  convey 

the  same  as  aforesaid;  and  that will  and heirs,  executors,  and 

administrators  shall  WARRANT  AND  DEFEND  the  same  to  the  grantee  and 

heirs  and  assigns  forever  against  the  lawful  claims  and  demands  of  all 

persons 

PROVIDED  NEVERTHELESS  that  if  or  heirs,  executors, 

administrators,  or  assigns  shall  pay  unto  the  grantee..,  or  executors, 

administrators,  or  assigns,  the  sum  of in  years  from  this  date, 

with  interest  semi-annually  at  the  rate  of per  cent  per  annum,  and  until 

such  payment  shall  pay  all  taxes  and  assessments,  to  whomsoever  laid  or  as- 
sessed, whether  on  the  granted  premises  or  on  any  interest  therein,  or  on  the  debt 
secured  hereby;  shall  keep  the  buildings  on  said  premises  insured  against  fire 

in  a  sum  not  less  than dollars,  for  the  benefit  of  the  grantee,  and 

executors,  administrators,  and  assigns,  in  such  form  and  at  such  insurance 
offices  as  they  shall  approve;  and,  at  least  two  days  before  the  expiration  of 


266    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

any  policy  on  said  premises,  shall  deliver  to  or  them  a  new  and  suf- 
ficient policy  to  take  the  place  of  the  one  so  expiring;  and  shall  not  commit  or 
suffer  any  strip  or  waste  of  the  granted  premises,  or  any  breach  of  any  cove- 
nant herein  contained;  then  this  deed,  as  also  note  of  even  date  here- 
with, signed  by whereby  promise  to  pay  to  the  grantee..,  or 

order,  the  said  principal  sum  and  installments  of  interest  at  the  time  aforesaid, 
shall  be  void. 

BUT  UPON  ANY  DEFAULT  in  the  performance  or  observance  of  the  fore- 
going condition,  the  grantee..,  or  executors,  administrators,  or  assigns, 

may  SELL  the  granted  premises,  or  such  portion  thereof  as  may  remain  subject 
to  this  mortgage  in  case  of  any  partial  release  hereof,  together  with  all  im- 
provements that  may  be  thereon,  by  public  auction  in  said  first  pub- 
lishing a  notice  of  the  time  and  place  of  sale  once  each  week  for  three  suc- 
cessive weeks  in  some  one  newspaper  published  in  said ,  the  first  pub- 
lication of  such  notice  to  be  not  less  than  twenty-one  days  before  the  day  of 
sale,  and  may  convey  the  same  by  proper  deed  or  deeds  to  the  purchaser  or 

purchasers  absolutely  and  in  fee  simple;  and  such  sale  shall  forever  bar 

and  all  persons  claiming  under from  all  right  and  interest  in  the  granted 

premises,  whether  at  law  or  in  equity.  And  out  of  money  arising  from  such 

sale  the  grantee  or representatives  shall  be  entitled  to  retain  all  sums 

then  secured  by  this  deed,  whether  then  or  thereafter  payable,  including  all 
costs,  charges,  and  expenses  incurred  or  sustained  by  them  by  reason  of  any 
default  in  the  performance  or  observance  of  the  said  condition,  rendering  the 

surplus,  if  any,  to or heirs,  or  assigns;  and hereby,  for 

and heirs  and  assigns,  covenant  with  the  grantee  and  

heirs,  executors,  administrators,  and  assigns  that,  in  case  a  sale  shall  be  made 
under  the  foregoing  power or  they  will  upon  request  execute,  acknowl- 
edge, and  deliver  to  the  purchaser  or  purchasers  a  deed  or  deeds  of  release 
confirming  such  sale,  and  said  grantee.,  and  assigns  are  hereby  ap- 
pointed and  constituted  the  attorney  or  attorneys  irrevocable  of  the  said 
grantor.,  to  execute  and  deliver  to  the  said  purchaser  a  full  transfer  of  all 
policies  of  insurance  on  the  buildings  upon  the  land  covered  by  this  mortgage 
at  the  time  of  such  sale. 

AND  IT  IS  AGREED  that  the  grantee..,  or  executors,  administra- 
tors, or  assigns,  or  any  person  or  persons  in  their  behalf,  may  purchase  at  any 
sale  made  as  aforesaid,  and  that  no  other  purchaser  shall  be  answerable  for 
the  application  of  the  purchase  money;  and  that,  until  default  in  the  perform- 
ance or  observance  of  the  condition  of  this  deed, and heirs  and 

assigns  may  hold  and  enjoy  the  granted  premises  and  receive  the  rents  and 
profits  thereof. 

And  for  the  consideration  aforesaid  do  hereby  release  unto  the 

said  grantee  and  heirs  and  assigns  all  right  of  or  to  both  DOWER 

and  HOMESTEAD  in  the  granted  premises,  and  all  rights  by  statutes  and  all 
other  rights  therein. 

IN  WITNESS  WHEREOF the  said  hereunto  set 

hand  and  seal  this  day  of in  the  year  one  thousand  nine 

hundred  and 

Signed  and  sealed  in  presence  of 


(ACKNOWLEDGMENT) 


APPENDIX  267 

No.  45 

MORTGAGE— NEW  YORK  (OLD  FORM) 

THIS  INDENTURE,  made  the  day  of in  the  year  nineteen 

hundred  and  between  hereinafter  described  as 

party  of  the  first  part,  and his  wife,  and hereinafter 

described  as  party  of  the  second  part 

WHEREAS,  the  said  by  virtue  of  a  certain  bond  or  obligation 

bearing  even  date  herewith,  justly  indebted  to  the  said  party  of  the 

second  part  in  the  sum  of dollars,  lawful  money  of  the  United  States, 

secured  to  be  paid,  together  with  the  interest  thereon,  at  the  time  and  in  the 
manner  expressed  in  said  bond  or  obligation. 

IT  BEING  EXPRESSLY  AGREED,  that  the  whole  of  the  principal  sum  shall 
become  due  after  default  in  the  payment  of  interest,  taxes,  or  assessments,  as 
hereinafter  provided. 

NOW  THIS  INDENTURE  WITNESSETH,  that  the  party  of  the  first  part, 
for  the  better  securing  the  payment  of  the  sum  of  money  mentioned  in  the  said 
bond  or  obligation,  with  the  interest  thereon,  and  also  for  and  in  consideration 
of  one  dollar  paid  by  the  party  of  the  second  part,  the  receipt  whereof  is  hereby 
acknowledged,  does  hereby  grant  and  release  unto  the  party  of  the  second  part, 
and  to and  assigns  forever,  all  


TOGETHER  with  the  appurtenances,  and  all  the  estate  and  rights  of  the 
party  of  the  first  part,  in  and  to  said  premises,  TO  HAVE  AND  TO  HOLD 

the  above  granted  premises  unto  the  party  of  the  second  part,  and 

assigns  forever.  PROVIDED  ALWAYS,  that  if  the  party  of  the  first  part  or 
the  heirs,  executors,  or  administrators  of  the  party  of  the  first  part,  shall  pay 

unto  the  party  of  the  second  part,  or  assigns,  the  said  sum  of  money 

mentioned  in  the  said  bond  or  obligation,  and  the  interest  thereon,  at  the  time 
and  in  the  manner  mentioned  in  the  said  bond  or  obligation,  that  then  these 
presents  and  the  estate  hereby  granted,  shall  cease,  determine  and  be  void. 

AND  the  party  of  the  first  part  covenants  with  the  party  of  the  second  part 
as  follows: 

FIRST.  That  the  party  of  the  first  part  will  pay  the  indebtedness  as  pro- 
vided in  this  mortgage  and  if  default  be  made  in  the  payment  of  any  part 
thereof,  the  party  of  the  second  part  shall  have  power  to  sell  the  premises 
herein  described,  according  to  law.  Said  premises  may  be  sold  in  one  parcel, 
any  provision  of  law  to  the  contrary  notwithstanding. 

SECOND.  That  the  party  of  the  first  part  will  keep  the  building  on  the 
said  premises  insured  against  loss  by  fire  for  the  benefit  of  the  party  of  the 
second  part.  Should  the  party  of  the  second  part  by  reason  of  such  insurance 
against  loss  by  fire,  as  aforesaid,  receive  any  sum  or  sums  of  money,  such 
amount  may  be  retained  and  applied  by  the  party  of  the  second  part  toward 
the  payment  of  the  sum  hereby  secured,  or  the  same  may  be  paid  over  either 

wholly  or  in  part  to  the  party  of  the  first  part, or  assigns,  to  enable  the  party 

of  the  first  part  to  repair  said  buildings  or  to  erect  new  buildings  in  their  place, 
or  for  any  other  purpose  or  object  satisfactory  to  the  party  of  the  second  part, 
without  affecting  the  lien  of  his  mortgage  for  the  full  amount  secured  thereby 
before  such  damage  by  fire,  or  such  payment  over,  took  place. 


268    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

THIRD.  And  it  is  hereby  expressly  agreed  that  the  whole  of  the  said  prin- 
cipal sum  shall  become  due  at  the  option  of  the  party  of  the  second  part  after 
default  in  the  payment  of  any  tax  or  assessment  for  thirty  days,  or  after  default 
in  the  payment  of  any  tax  or  assessment  for  thirty  days  after  notice  and  demand, 
or  after  default  for  thirty  days  after  notice  and  demand  in  the  payment  of 
any  installment  of  any  assessment  for  local  improvements  heretofore  or  here- 
after laid  which  is  or  may  become  payable  in  annual  installments,  and  which 
has  affected,  now  affects  or  hereafter  may  affect  the  said  premises,  notwith- 
standing that  such  installment  be  not  due  and  payable  at  the  time  of  such 
notice  and  demand ;  and  also,  that  the  whole  of  the  said  principal  sum  shall 
become  due  at  the  option  of  the  party  of  the  second  part  upon  any  default  in 
keeping  the  buildings  on  the  premises  insured  against  loss  by  fire  as  required 
by  paragraph  marked  "second"  above,  or  if  after  application  by  any  holder 
of  this  mortgage  to  two  or  more  fire  insurance  companies  lawfully  doing  busi- 
ness in  the  State  of  New  York,  and  issuing  policies  upon  real  property  situate 
in  the  place  where  the  mortgaged  premises  are  situate,  the  companies  to  which 
such  application  has  been  made  shall  refuse  to  issue  such  policies. 

FOURTH.  That  the  holder  of  this  mortgage,  in  any  action  to  foreclose  it, 
shall  be  entitled,  without  notice  and  without  regard  to  the  adequacy  of  any 
security  for  the  debt,  to  the  appointment  of  a  receiver  of  the  rents  and  profits 
of  said  premises;  and  in  the  event  of  any  default  or  defaults  in  paying  said 
principal  or  interest,  such  rents  and  profits  are  hereby  assigned  to  the  holder 
of  this  mortgage  as  further  security  for  the  payment  of  said  indebtedness. 

FIFTH.  That  until  the  amount  hereby  secured  is  paid,  the  party  of  the  first 
part  will  pay  all  taxes,  assessments  and  water  rates  which  may  be  assessed  or 
become  liens  on  said  premises,  and,  in  default  thereof,  the  holder  of  this 
mortgage  may  pay  the  same,  and  the  party  of  the  first  part  will  repay  the 
same  with  interest,  and  the  same  shall  be  liens  on  said  premises  and  secured 
by  this  mortgage. 

SIXTH.  In  the  event  of  the  passage  after  the  date  of  this  mortgage  of  any 
law  of  the  State  of  New  York,  deducting  from  the  value  of  land  for  the  pur- 
poses of  taxation  any  lien  thereon,  or  changing  in  any  way  the  laws  for  the 
taxation  of  mortgages  or  debts  secured  by  mortgage  for  State  or  local  pur- 
poses, or  the  manner  of  the  collection  of  any  such  taxes,  so  far  as  to  affect 
this  mortgage,  the  holder  of  this  mortgage,  and  of  the  debt  which  it  secures, 
shall  have  the  right  to  give  thirty  days'  written  notice  to  the  owner  of  said 
land  requiring  the  payment  of  the  mortgage  debt,  and  it  is  hereby  agreed  that 
if  such  notice  be  given,  the  said  debt  shall  become  due,  payable  and  collectible 
at  the  expiration  of  said  thirty  days. 

SEVENTH.  That  the  mailing  of  a  written  notice  or  demand  by  depositing 
it  in  any  post  office,  station  or  letter  box,  enclosed  in  a  post-paid  envelope 
addressed  to  the  owner  of  record  of  said  mortgaged  premises  and  directed 
to  such  owner  at  the  last  address  actually  furnished  to  the  holder  of  this 
mortgage,  or,  if  no  such  address  has  been  furnished,  then  to  such  record  owner 
at  the  mortgaged  premises,  shall  be  sufficient  notice  and  demand  in  any  case 
arising  under  this  instrument. 

EIGHTH.  That  the  party  of  the  first  part  will  execute  any  further  necessary 
assurance  of  the  title  to  said  premises,  and  will  forever  warrant  said  title. 

NINTH.  The  party  of  the  first  part,  and  any  subsequent  owner  of  the  prem- 
ises described  herein,  upon  request,  made  either  personally  or  by  mail,  shall 
certify,  by  a  writing  duly  acknowledged,  to  the  party  of  the  second  part  or  to 
any  proposed  assignee  of  this  mortgage,  the  amount  of  principal  and  interest 
then  owing  on  this  mortgage  and  whether  any  offsets  or  defences  exist  against 
the  mortgage  debt;  upon  failure  to  furnish  such  certificate  after  the  expiration 


APPENDIX  269 

of  six  days  in  case  the  request  is  made  personally,  or  after  the  expiration  of 
thirty  days  after  the  mailing  of  such  request  in  case  the  request  is  made  by 
mail,  this  mortgage  shall  become  due  at  the  option  of  the  holder  thereof. 

TENTH.  If  any  action  or  proceeding  be  commenced  by  any  person  other  than 
the  holder  of  this  mortgage  (except  an  action  to  foreclose  this  mortgage  or  to 
collect  the  debt  secured  thereby)  to  which  action  or  proceeding  the  holder  of 
this  mortgage  is  made  a  party,  or  in  which  it  becomes  necessary  to  defend  or 
uphold  the  lien  of  this  mortgage,  all  sums  paid  by  the  holder  of  this  mortgage 
for  the  expense  of  any  litigation  to  prosecute  or  defend  the  rights  and  liens 
created  by  this  mortgage  (including  reasonable  counsel  fees),  shall  be  paid  by 
the  party  of  the  first  part,  together  with  interest  thereon  at  the  rate  of  six  per 
cent  per  annum,  and  any  such  sum  and  the  interest  hereon  shall  be  a  lien 
on  said  premises,  prior  to  any  right,  or  title  to  interest  in  or  claim  upon  said 
premises  attaching  or  accruing  subsequent  to  the  lien  of  this  mortgage,  and 
shall  be  deemed  to  be  secured  by  this  mortgage  and  by  the  bond  which  it 
secures.  In  any  action  or  proceeding  to  foreclose  this  mortgage,  or  to  recover 
or  collect  the  debt  secured  thereby,  the  provisions  of  law  respecting  the  re- 
covery of  costs,  disbursements  and  allowances  shall  prevail  unaffected  by  this 
covenant.* 

IN  WITNESS  WHEREOF,  the  said  party  of  the  first  part  has  signed  and 
sealed  this  instrument  th*  day  and  year  first  above  written. 

Witness: 

(SEAL). 

(ACKNOWLEDGMENT) 


*If  subject  to  prior  mortgage,  add: 

"This  mortgage  is  subject  and  subordinate  to  two  mortgages,  one  given  to 

secure  dollars  and  interee1  ^nd  the  other,  dollars  and 

interest,  respectively,  now  prior  liens  on  said  premises. 

AND  IT  IS  HEREBY  EXPRESSLY  AGREED,  that  should  any  default  be 
made  in  the  payment  of  the  interest  on  either  or  both  said  prior  mortgages,  and 
should  such  interest  remain  unpaid  and  in  arrears  for  the  sp3.ce  of  ten  days,  or 
should  any  suit  be  commenced  to  foreclose  either  said  prior  mortgages,  then 
the  amount  secured  by  this  mortgage  and  the  accompanying  bond  shall  become 
and  be  due  and  payable  at  any  time  thereafter  at  the  option  of  the  owner  or 
holder  of  this  mortgage. 

AND  IT  IS  HEREBY  FURTHER  EXPRESSLY  AGREED,  that  should  any 
default  be  made  in  the  payment  of  the  interest  on  either  or  both  said  prior 
mortgages,  the  holder  of  this  mortgage  may  pay  such  interest,  and  the  amount 
so  paid,  with  legal  interest,  thereon  from  the  time  of  such  payment,  may  be 
added  to  the  indebtedness  secured  by  this  mortgage  and  the  accompanying 
bond,  and  shall  be  deemed  to  be  secured  by  this  mortgage  and  said  bond,  and 
may  be  collected  thereunder." 

If  to  be  subordinated  to  new  mortgage  or  building  loan,  insert: 

"This  mortgage  is  and  shall  at  all  times  be  subject  and  subordinate  in  lien 
to  the  lien  of  a  building  loan  mortgage  and  to  any  permanent  first  mortgage 

in  an  amount  not  exceeding  dollars  and  interest  and  to  all  amounts 

which  may  at  any  time  be  advanced  thereon  not  exceeding  in  the  aggregate 

dollars  and  interest  and  the  holder  of  this  mortgage  agrees  to  execute 

any  proper  agreement  to  evidence  such  subordination." 


270    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  46 

ASSIGNMENT  OF  MORTGAGE— WITH  COVENANT 

KNOW  ALL  MEN  BY  THESE  PRESENTS,  That  I, party  of  the  first 

part,  for  and  in  consideration  of dollars,  lawful  money  of  the  United  States, 

paid  by party  of  the  second  part,  do  sell,  assign  and  transfer  unto 

the  party  of  the  second  part,  a  certain  indenture  of  mortgage  given  to  secure 

payment  of  the  sum  of  dollars  and  interest,  bearing  date  the  

day  of ,  nineteen  hundred  and ,  made  by to and 

duly  recorded  in  the  office  of  the of  the  County  of on  the 

day  of ,  nineteen  hundred  and ,  in  liber of  mortgages, 

of  Section ,  page ,  which  said  mortgage  covers  premises 

which  said  premises  are  included  in  Block  Number  in  Section  

on  the  Land  Map  of  the 

TOGETHER  with  the  bond  or  obligation  described  in  said  mortgage,  and 
the  moneys  due  and  to  grow  due  thereon  with  the  interest. 

TO  HAVE  AND  TO  HOLD  the  same  to  the  party  of  the  second  part,  and 
to  the  successors,  legal  representatives  and  assigns  of  the  party  of  the  second 
part,  forever,  subject  only  to  the  proviso  in  said  indenture  of  mortgage 
mentioned. 

AND  the  party  of  the  first  part  does  hereby  make,  constitute  and  appoint 
the  party  of  the  second  part  the  true  and  lawful  attorney,  irrevocable,  of  the 
party  of  the  first  part,  in  the  name  of  the  party  of  the  first  part,  or  otherwise, 
but  at  the  proper  costs  and  charges  of  the  party  of  the  second  part,  to  have, 
use  and  take  all  lawful  ways  and  means  for  the  recovery  of  said  money  and 
interest,  and  in  case  of  payment  to  discharge  the  same  as  fully  as  the  party  of 
the  first  part  might  or  could  do  if  these  presents  were  not  made. 

AND  the  party  of  the  first  part  does  hereby  covenant  with  the  party  of  the 
second  part,  and  with  the  successors,  legal  representatives  and  assigns  of  the 
party  of  the  second  part,  that  there  is  now  owing  upon  mortgage,  with- 
out offset  or  defense  of  any  kind,  the  principal  sum  of dollars,  with 

interest  thereon  at per  centum  per  annum  from  the day  of 

nineteen  hundred  and 

IN  WITNESS  WHEREOF,  the  party  of  the  first  part 

[L.8.] 

In  the  presence  of 


(ACKNOWLEDGMENT) 


[The  last  paragraph  in  the  above  assignment  is  known  as  the  covenant  and 
is  often  omitted.  In  case  the  assignor  refuses  to  assume  any  responsibility,  he 
may  insert  the  following  clause: 

"This  assignment  is  given  and  received  upon  the  express  understanding  that 
no  recourse  shall  be  had  to  the  assignor  in  any  event  whatsoever."] 


APPENDIX  271 

No.  47 

SATISFACTION  OF  MORTGAGE 

KNOW  ALL  MEN  BY  THESE  PRESENTS,  that  I,  ,  DO 

HEREBY  CERTIFY,  that  a  certain  indenture  of  mortgage,  bearing  date  the 

day  of nineteen  hundred  and  ,  made  and  executed  by 

to  secure  payment  of  the  principal  sum  of  dollars  and 

interest,  and  duly  recorded  in  the  office  of  the of  the  County  of 

in  liber of  mortgages,  of  Section ,  page ,  on  the day 

of  nineteen  hundred  and  

IS  PAID,  and  do  hereby  consent  that  the  same  be  discharged  of  record. 

Dated,  the day  of nineteen  hundred  and  

[L.S.] 

In  presence  of: 


(ACKNOWLEDGMENT) 
No.  48 

EXTENSION  OF  MORTGAGE 

AGREEMENT,  made  the day  of nineteen  hundred  and 

between  hereinafter  designated  as  the  party  of  the  first  part,  and 

,  hereinafter  designated  as  the  party  of  the  second  part: 

WITNESSETH,  that  the  party  of  the  first  part,  the  holder  of  a  certain  bond 

made  by dated 19. . .,  secured  by  a  mortgage  bearing  even 

date  therewith,  and  recorded  in  the  office  of  the of  the  County  of , 

in  Liber of  Mortgages,  page  ,  on  which  bond  there  is  now  due 

the  sum  of  dollars,  with  interest  thereon,  in  consideration  of  one 

dollar  paid  by  said  party  of  the  second  part,  and  other  valuable  consideration, 
the  receipt  whereof  is  hereby  acknowledged,  does  hereby  extend  the  payment 

of  the  principal  indebtedness  secured  by  said  bond  to  the day  of 

nineteen  hundred  and  ; 

PROVIDED  the  party  of  the  second  part  meanwhile  pay  interest  on  the 

amount  owing  on  said  bond  at  the  rate  of per  centum  per  annum,  from 

19...,  semi-annually,  on  the  first  days  of  and  in 

each  year  and  also  comply  with  all  the  other  terms  of  said  bond  and-  mortgage 
as  hereby  modified: 

AND  ,  the  party  of  the  second  part,  in  consideration  of  the 

above  extension  and  of  one  dollar  paid  by  said  party  of  the  first  part,  and  other 
valuable  consideration,  the  receipt  whereof  is  hereby  acknowledged,  does  hereby 
covenant  to  pay  said  principal  sum  and  interest  as  above  set  forth,  and  not  be- 
fore the  maturity  thereof  as  the  same  is  hereby  extended,  and  to  comply  with 
the  other  terms  of  said  bond  and  mortgage;  and  the  party  of  the  second  part 
covenants  that  the  principal  and  the  interest  hereby  agreed  to  be  paid,  shall 
be  a  lien  on  the  mortgaged  premises  and  be  secured  by  said  bond  and  mortgage, 
and  that  when  the  terms  of  said  bond  and  mortgage  in  any  way  conflict  with 
the  terms  and  provisions  of  this  agreement,  the  terms  and  provisions  of  this 
agreement  shall  prevail,  and  that  there  are  no  offsets  or  defences  to  said  bond 
and  mortgage. 

The  party  of  the  second  part  represents  that  said  ,  party  of  the 

second  part,  now  owns  the  premises  described  in  said  mortgage. 


272    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

AND   ,  the  party  of  the  second  part,  covenants  with  the  party  of 

the  first  part  as  follows: 

1.  That  the  party  of  the  second  part  will  pay  the  indebtedness  as  hereinbefore 
provided. 

2.  That  the  party  of  the  second  part  will  keep  the  buildings  on  the  premises 
insured  against  loss  by  fire  for  the  benefit  of  the  party  of  the  first  part. 

3.  That  no  building  en  the  premises  shall  be  removed  or  demolished  without 
the  consent  of  the  party  of  the  first  part. 

4.  That  the  whole  of  said  principal  sum  shall  become  due  after  default  in 

the  payment  of  any  installment  of  principal  or  of  interest  for   days,  or 

after  default  in  the  payment  of  any  tax,  water  rate  or  assessment  for   

days  after  notice  and  demand. 

5.  That  the  holder  of  said  Mortgage,  in  any  action  to  foreclose  it,  shall  be 
entitled  to  the  appointment  of  a  receiver. 

6.  That  the   party  of   the   second    part   will    pay    all    taxes,    assessments    or 
water  rates,  and  in  default  thereof,  the  party  of  the  first  part  may  pay  the 
same. 

7.  That  the  party  of  the  second  part  within   days  upon  request  in 

person  or  within  days  upon  request  by  mail  will  furnish  a  statement  of 

the  amount  due  on  said  Mortgage. 

8.  That  notice  and  demand  or  request  may  be  in  writing  and  may  be  served 
in  person  or  by  mail. 

9.  That  the  party  of  the  second  part  warrants  the  title  to  the  premises. 

IN  WITNESS  WHEREOF,  this  agreement  has  been  duly  executed  by  the 
parties  hereto. 

In  presence  of: 


(ACKNOWLEDGMENT) 


No.  49 

SUBORDINATION  AGREEMENT 

AGREEMENT,  made  this   day  of   ,  nineteen  hundred  and 

twenty ,  between  ,  part. .  of  the  first  part, 

AND 

,  part.,  of  the  second  part. 

WITNESSETH,  that  whereas,  the  part.,  of  the  first  part  now  the 

owner  and  holder  of  a  certain  mortgage,  and  the  Bond  in  said  Mortgage  men- 
tioned, made  by to to  secure  the  payment  of  the  principal 

sum  of  dollars  and  interest  thereon,  and  dated  ,  19....; 

which  said  Mortgage  was  duly  recorded  in  the  office  of  the  of  the 

County  of  on  19...,  in  Liber  ,  in  Section  of 

Mortgages,  at  page ,  Block ,  and  covers  the  premises  hereinafter 

mentioned. 

AND  WHEREAS,  about  to  execute  and  deliver  to  said  part. .  of 

the  second  part,  a  Bond  and  Mortgage  to  secure  the  payment  of  the  principal 

sum  of  dollars,  and  interest  thereon,  dated  ,  19....,  and 

covering  the  premises,  situate,  lying  and  being  in  ,  County 

and  State  of 

AND  ".VHEREAS,  the  said  part.,  of  the  second  part  has  refused  to  make 
said  loan  of  dollars,  unless  said  first  mentioned  Mortgage  is  sub- 


APPENDIX  273 

ordinated  in  lien  to  the  lien  of  said  Mortgage  about  to  be  made  to  the  part., 
of  the  second  part,  and  to  any  and  all  advances  heretobefore  or  hereafter  to  be 
made  on  account  thereof. 

NOW,  THEREFORE,  in  consideration  of  the  premises  and  to  induce  said 
part. .  of  the  second  part  to  make  said  loan,  and  of  one  dollar  paid  to  said  part. . 
of  the  first  part  by  said  part.,  of  the  second  part,  the  receipt  whereof  is  hereby 
acknowledged,  the  said  part.,  of  the  first  part  hereby  covenant.,  and  agree., 
with  the  said  part.,  of  the  second  part,  that  said  Mortgage  held  by  said  part., 
of  the  first  part  is,  and  shall  continue  to  be,  subject  and  subordinate  in  lien 

to  the  lien  of  said  Mortgage  for dollars,  about  to  be  made  to  the 

part.,  of  the  second  part  hereto,  and  to  any  and  all  advances  heretofore  or 
hereafter  to  be  made  on  account  thereof. 

This  Agreement  shall  be  binding  on,  and  enure  to  the  benefit  of  the  respective 
heirs,  personal  representatives,  successors  and  assigns,  of  the  parties  hereto. 

IN  WITNESS  WHEREOF,  the  said  part.,  of  the  first  part  ha.,  hereunto 
day  and  year  first  above  written. 

Sealed  and  delivered  in  the  presence  of 


(ACKNOWLEDGMENT) 

No.  50       , 

RELEASE  OF  PART  OF  MORTGAGED  PREMISES 

THIS  INDENTURE,  made  the day  of nineteen  hundred  and 

between  of party  of  the  first  part,  and , 

party  of  the  second  part, 

WHEREAS,  by  indenture  of  mortgage,  bearing  date  the  

day  of  ,  nineteen  hundred  and  recorded  in  the  office  of  the 

of  the  County  of  ,  in  liber  of  mortgages,  of  Section 

,  page  ,  on  the  day  of  ,  nineteen  hundred  and 

,  for  the  consideration  therein  mentioned,  and  to  secure  the  payment  of 

the  money  therein  specified,  did  cpnvey  certain  lands  and  tenements,  of  which 
the  lands  hereinafter  described  are  part,  unto  the  


AND  WHEREAS,  the  party  of  the  first  part,  at  the  request  of  the  party  of 
the  second  part,  has  agreed  to  give  up  and  surrender  the  lands  hereinafter 
described  unto  the  party  of  the  second  part,  and  to  hold  and  retain  the  residue 
of  the  mortgaged  lands  as  security  for  the  money  remaining  due  on  said 
mortgage, 

NOW  THIS  INDENTURE  WITNESSETH,  that  the  party  of  the  first  part, 

in  pursuance  of  said  agreement,  and  in  consideration  of dollars,  lawful 

money  of  the  United  States,  paid  by  the  party  of  the  second  part,  does  grant, 
release  and  quit  claim  unto  the  party  of  the  second  part,  all  that  part  of  said 
mortgaged  lands  described  as  follows: 

(DESCRIPTION.) 

together  with  the  hereditaments  and  appurtenances  thereunto  belonging,  and 
all  the  right,  title  and  interest  of  the  party  of  the  first  part,  of,  in  and  to  the 


274   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

same,  to  the  intent  that  the  lands  hereby  conveyed  may  be  discharged  from  said 
mortgage,  and  that  the  rest  of  the  land  in  said  mortgage  specified  may  remain 
to  the  party  of  the  first  part  as  heretofore, 

TO  HAVE  AND  TO  HOLD,  the  lands  and  premises  hereby  released  and 

conveyed,  to  the  party  of  the  second  part, and  assigns  to  and 

own  proper  use,  benefit  and  behoof  forever,  free,  clear  and  discharged 

of  and  from  all  lien  and  claim  under  and  by  virtue  of  the  indenture  of  mort- 
gage aforesaid. 

IN  WITNESS  WHEREOF,  the  party  of  the  first  part  

[L.S.] 

In  presence  of: 


(ACKNOWLEDGMENT) 


No.  51 

SPECIMEN  OF  RELEASE  CLAUSE  FOR  INSERTION 
IN  MORTGAGE 

And  the  mortgagee  hereby  covenants  and  agrees  for  itself,  its  successors  and 
assigns,  to  and  with  the  mortgagor,  its  successors  and  assigns,  that  the  owner 
of  the  premises  above  described  shall  have  the  privilege  of  obtaining  releases 
of  portions  thereof  from  the  lien  of  this  mortgage  upon  the  following  terms 
and  conditions,  namely:  No  release  shall  be  given  for  less  than  two  adjoining 
lots,  and  interest  on  the  sum  paid  therefor  shall  be  paid  up  to  the  date  of  the 
delivery  thereof.  All  releases  shall  be  prepared  by  the  attorney  for  the  holder 
of  the  mortgage  at  the  expense  of  the  owner  of^the  premises.  There  shall  be 
paid  for  releases  of  lots  as  follows: 

(Insert  designation  of  portions  and  release  price  of  each.) 

No  release  shall  be  given  if  the  semi-annual  interest  or  any  part  thereof  or 
any  taxes  or  assessments  remain  unpaid. 

No  portion  of  said  premises  shall  be  released  without  access  to  the  other 
portion  of  said  mortgaged  premises  being  given  by  means  of  an  open  street  or 
avenue,  the  said  mortgagee  always  reserving  in  the  release  to  be  given  as 
aforesaid  a  right  of  way  over  such  street  or  avenue  to  the  remaining  unreleased 
portion  of  said  premises. 

The  expense  for  the  preparation  of  each  release  shall  be  Five  Dollars  and 
Fifty  Cents  ($5.50)  for  all  such  property  as  shall  be  sold  to  any  one  purchaser 
at  any  one  time  and  required  to  be  released,  the  mortgagee  having  the  right  to 
execute  separate  releases  to  the  several  purchases  or  a  release  to  the  mortgagor. 

It  is  further  expressly  understood  and  agreed  by  and  between  the  parties 
hereto  that  should  the  owner  of  said  premises  desire  to  make  deeds  of  cession 
to  the  City  of  New  York,  parts  of  said  premises  that  lie  within  the  lines  of  a 
street  or  avenue  as  laid  down  on  the  Town  Survey  Commissioners  Map  of 
Kings  County  for  the  purpose  of  dedicating  such  street  or  avenue,  then  the 
holder  of  this  mortgage  will  release  the  premises  in  such  street  or  avenue  from 
the  lien  of  this  mortgage  without  being  paid  any  consideration  therefor  except 
the  counsel  fee  for  preparing  the  release. 


APPENDIX  275 

No.  52 

SPECIMEN  OF  RELEASE  CLAUSE  FOR  USE  IN 
RELEASE  AGREEMENT 

NOW,  THEREFORE,  in  consideration  of  such  requests,  and  the  further  con- 
sideration of  the  sum  of  One  ($1.00)  Dollar  and  other  good  and  valuable  con- 
siderations to  it  in  hand  paid  by  the  party  of  the  second  part,  the  receipt 
whereof  is  hereby  acknowledged,  the  party  of  the  first  part  agrees  that  until 
it  shall  demand  payment  of  the  entire  principal  sum  secured  to  be  paid  by  said 
bond  and  mortgage,  or  any  balance  due  thereon,  that  it  will  release  from  the 
lien  of  said  mortgage  any  or  all  of  the  lots  shown  upon  said  map  upon  the 
payment  of  the  sums  stated  as  the  release  price  of  each  lot  in  the  Schedule 
hereto  annexed  and  hereby  made  a  part  hereof,  together  with  the  interest  thereon 
trom  the  date  of  the  last  payment  of  interest  to  the  date  of  the  delivery  of  said 
release, — such  release  shall,  however,  be  upon  and  subject  to  the  following 
conditions: 

FIRST:  All  releases  shall  be  drawn  by  the  attorney  of  the  party  of  the  first 
part  at  the  expense  of  the  party  of  the  second  part,  and  not  to  exceed  a  charge 
of  Five  ($5.00)  Dollars  for  each  release  so  drawn.  No  release  can  be  de- 
manded as  a  matter  of  right  if  interest  or  the  taxes  affecting  the  mortgaged 
premises  are  in  arrears. 

SECOND:  In  the  event  of  a  foreclosure  of  said  mortgage,  and  a  sale  of  the 
premises  thereunder,  the  unreleased  portion  may  be  sold  in  one  or  more  parcels 
at  the  election  of  the  party  of  the  first  part,  and  the  order  of  sale  of  any  parcels, 
if  sold  in  more  than  one  parcel,  shall  be  determined  wholly  by  the  party  of  the 
first  part. 

THIRD:  The  release  of  any  lot  under  this  agreement  shall  carry  with  it  the 
right  of  ingress  and  egress  over  the  street  upon  which  it  fronts,  and  such  other 
street  or  streets  as  may  be  necessary  to  reach  the  nearest  public  highway. 

SCHEDULE  OF  LOTS  AND  OF  RELEASE  PRICES. 
Bltck  Plot  Release  Price 


No.  53 

SUBORDINATION  AND  DEFAULT  CLAUSES  FOR 
USE  IN  JUNIOR  MORTGAGES 

This  mortgage  is  subject  and  subordinate  to mortgage given 

to  secure  the  payment  of Dollars  and  interest,  recorded  in  the  office 

of  the of  the  County  of in  Liber of  mortgages,  page 

,  now  a  prior  lien  on  said  premises,  and  shall  be  and  remain  subject  and 

subordinate  to  any  extension  thereof  or  to  any  new  mortgage  replacing  it,  to 
an  amount  not  in  excess  of dollars. 

AND  IT  IS  HEREBY  EXPRESSLY  AGREED,  that  should  any  default  be 

made  in  the  payment  of  the  interest  on  said  prior  mortgage..,  and 

such  interest  remain  unpaid  and  in  arrears  for  the  space  of  ten  days,  or  should 

any  suit  be  commenced  to  foreclose  said  prior  mortgage..,  then  the 

amount  secured  by  this  mortgage  and  the  accompanying  bond  shall  become  and 
be  due  and  payable  at  any  time  thereafter  at  the  option  of  the  owner  or  holder 
of  this  mortgage. 


276    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

AND  IT  IS  HEREBY  FURTHER  EXPRESSLY  AGREED,  that  should  any 

default  be  made  in  the  payment  of  the  interest  on  said  prior  mortgage. ., 

the  holder  of  this  mortgage  may  pay  such  interest,  and  the  amount  so  paid,  with 
legal  interest  thereon  from  the  time  of  such  payment,  may  be  added  to  the 
indebtedness  secured  by  this  mortgage  and  the  accompanying  bond,  and  shall 
be  deemed  to  be  secured  by  this  mortgage  and  said  bond,  and  may  be  collected 
thereunder. 


No.  54 

BUILDING  LOAN  AGREEMENT 

AGREEMENT,  made  this day  of 19. . .,  between 

hereinafter  referred  to  as  the  borrower  and  hereinafter  referred  to 

as  the  lender. 

WHEREAS,  the  borrower  has  applied  to  the  lender  for  a  loan  of 

dollars,  to  be  evidenced  by  the  bond.,  of  the  borrower,  conditioned 

for  the  repayment  of  the  amount  advanced,  on  the day  of 19. ., 

and  interest  thereon  at  the  rate  of  six  per  cent  per  annum,  payable  semi- 
annually,  and  containing  a  provision  that  if  the  borrower  observe  all  the 
provisions  of  this  agreement,  and  the  building  to  be  erected  on  the  premises 
described  in  Schedule  "A"  be  completed  in  accordance  therewith,  which  com- 
pletion shall  be  evidenced  by  the  certificate.,  of  the  lender,  in  form  to  be 
recorded,  that  then  from  and  after  such  completion,  the  rate  of  interest  shall 

be  per  cent  per  annum,  payable  semi-annually.  Until  said  building 

completed,  and  such  certificate delivered,  said  loan  shall  be 

due  on  demand,  at  the  option  of  the  lender. 

NOW,  THEREFORE,  the  lender  hereby  accepts  said  application  and  agrees 
to  make  said  loan,  and  the  borrower  agrees  to  take  it,  upon  the  following  terms 
and  conditions: 

Said  loan  shall  be  secured  by  mortgage.,  duly  executed  and  ac- 
knowledged by  all  persons  necessary  to  make valid  lien.,  on  the  prem- 
ises described  in  Schedule  A  hereto  annexed,  of  such  a  nature  as  the  lender 
is  willing  to  accept,  the  said  bond.,  and  mortgage.,  to  contain  the  clauses 
usually  employed  by  in  mortgages. 

FIRST. — The  borrower  is  to  erect  on  said  premises,   

SECOND. — Said  loan  is  to  be  advanced  at  such  times  and  in  such  amounts  as 
the  lender  may  approve,  provided  in  the  judgment  of  its  appraiser  the  owner 
is  entitled  to  an  advance. 

THIRD.— The  lender  may  at  any  time  release  portions  of  the  mortgaged 
premises,  upon  receiving  what,  in  the  opinion  of  the  lender,  is  a  proper  payment 
on  account  of  the  mortgage  debt. 

FOURTH. — The  lender  may  require  three  days'  notice  in  writing  from  the 
applicant  before  an  advance  shall  be  called  for. 

FIFTH. — No  advance  will  be  made  unless  in  the  judgment  of  the  lender  all 
work  usually  done  at  the  stage  of  construction  when  the  advance  is  made,  be 
done  in  a  good  and  workmanlike  manner,  and  all  material  and  fixtures  usually 
furnished  and  installed  at  that  time  are  furnished  and  installed. 

SIXTH. — The  lender  or  any  holder  of  said  bond. .  and  mortgage. .  may  extend 
the  payment  of  the  principal  secured  by  said  bond.,  and  mortgage.,  and  any 
extension  so  granted  shall  be  deemed  made  in  pursuance  of  this  agreement  and 
not  to  be  a  modification  thereof. 


APPENDIX  277 

SEVENTH. — In  either  of  the  following  events,  no  further  advances  will  be 
made  by  the  lender,  and  the  bond.,  and  mortgage.,  herein  referred  to  shall 
become  due. 

1.  If  the  mortgage  offered  by  the  borrower  shall  not  give  to  the  lender  a  lien 
for  the  indebtedness  to  be  secured  thereby  on  the  premises  above  set  forth,  satis- 
factory to  the  lender. 

2.  If  the  lender  shall  not  approve  of  the  payment  called  for  because  of  some 
act,    encumbrance    or    question    arising    after    the    making    of    the    preceding 
payment. 

3.  If   the    borrower    assign    this   contract   or    said    advances   or    any   interest 
therein,  or  if  said   premises  be  conveyed  or  encumbered  in  any  way  without 
the  consent  of  the  lender. 

4.  If  the  improvements  on  said  premises,  or  any  building. .    which  may  be 
erected  upon  said  premises  shall  materially  encroach  upon  the  street  or  upon 
adjoining  property. 

5.  If  the  building. .   be  not  erected  with  reasonable  speed   and   in   a  work- 
manlike manner. 

6.  If  the  improvements  on  said  premises  be  materially  injured  or  destroyed 
by  fire  or  otherwise. 

7.  If  the  makers  of  said  bond.,    and  mortgage.,   shall  fail  to  comply  with 
any  of  the  covenants  therein  contained. 

8.  If  any  materials,  fixtures  or  articles  used  in  the  construction  of  the  build- 
ing. .  or  appurtenant  thereto  be  not  purchased  by  the  owner  of  the  land  so  that 
the  ownership  thereof  will  vest  in  said  owner  free  from  encumbrance,  on  de- 
livery at  the  premises. 

9.  If  the  borrower  do  not  erect  said  building. .    in  accordance  with  plans 
and  specifications  which  are   satisfactory  to  the   lender  and  which  have  been 
approved  by  the  Building  and  Tenement  Department. 

10.  If  the  owners  of  said   premises  do   not  permit   a   representative  of  the 
lender  to  enter  upon  said  premises  and  inspect  the  building. .    thereon  at  all 
reasonable  times  during  construction. 

EIGHTH. — The  holder  of  the  mortgage.,  referred  to  reserves  the  right  to 
decrease  the  total  amount  to  be  loaned  under  this  agreement. 

NINTH. — So  much  of  the  loan  as  may  be  required  for  that  purpose,  shall  be 
applied  at  any  time  that  the  lender  so  requires,  to  the  payment  or  satisfaction 
and  to  the  discharge  of  any  existing  mortgages  or  any  encumbrance  on  the 
premises  above  described,  and,  under  the  direction  of  the  applicant,  to  the 
payment  of  any  fees,  brokerage  or  other  expenses  incident  to  the  obtaining  or 
making  of  the  loan  contracted  for. 

IN  WITNESS  WHEREOF,  the  parties  hereto  have  signed  and  sealed  these 
presents  the  day  and  year  first  above  written. 

IN  THE  PRESENCE  OF: 


(ACKNOWLEDGMENTS) 


SCHEDULE  A. 

The  mortgage  herein   referred  to  cover.,    premises  situate  in  the  Borough 

of   of  the   City  of  New  York,   County  of   and  State  of 

New  York,  shown  on  the  following  diagram. 


278    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  55 

BUILDING  LOAN  MORTGAGE 

THIS  MORTGAGE,  made  the day  of nineteen  hundred  and 

between ,  the  mortgagor,  and ,  the  mortgagee. 

WITNESSETH,  that  to  secure  the  payment  of  an  indebtedness  in  the  sum  of 

dollars,  lawful  money  of  the  United  States,  or  so  much  thereof  as  may 

be  advanced  at  any  time  by  the  holder  of  this  mortgage,  to  be  paid  on  the 

day  of ,  nineteen  hundred  and ,  with  the  interest  at  the  rate  of 

six  per  centum  per  annum  on  the  amounts  advanced  thereon  to  be  computed 
from  the  dates  of  the  advances  until  the  completion  of  the  building  now  being 
or  about  to  be  erected  upon  the  premises  hereinafter  described,  which  comple- 
tion shall  be  evidenced  by  a  certificate  of  the  holder  of  this  mortgage,  and  after 

the  delivery  of  such  certificate  at  the  rate  of per  centum  per  annum,  to 

be  paid  on  the day  of next  ensuing  the  date  hereof,  and  semi- 

annually  thereafter,  it  being  agreed  that  until  the  completion  of  the  said  build- 
ing and  the  delivery  of  such  certificate,  said  principal  sum  or  so  much  thereof 
as  may  be  advanced  and  all  interest  shall,  at  the  option  of  the  holder  of  this 
mortgage,  be  payable  on  demand  without  notice,  according  to  a  certain  bond  or 
obligation  bearing  even  date  herewith,  the  mortgagor  hereby  mortgages  to  the 
mortgagee,  all  


TOGETHER  with  all  fixtures  and  articles  of  personal  property,  now  or 
hereafter  attached  to,  or  used  in  connection  with  the  premises,  all  of  which  are 
covered  by  this  mortgage. 

AND  the  mortgagor  covenants  with  the  mortgagee  as  follows: 

1.  That  the  mortgagor  will  pay  the  indebtedness  as  hereinbefore  provided. 

2.  That  the  mortgagor  will  keep  the  buildings  on  the  premises  insured  against 
loss  by  fire  for  the  benefit  of  the  mortgagee. 

3.  That  no  building  on  the  premises  shall  be  removed  or  demolished  without 
the  consent  of  the  mortgagee. 

4.  That  the  whole  of  said  principal  sum  shall  become  due  at  the  option  of 
the  holder  of  this  mortgage  immediately  after  default  in  the  payment  of  any 
installment  of  principal,  or  in  the  payment  of  interest  for  thirty  days,  or  after 
default  in  the  payment  of  any  tax,  water  rate  or  assessment  for  thirty  days. 

5.  That  the  holder  of  this  mortgage,  in  any  action  to  foreclose  it,  shall  be  en- 
titled to  the  appointment  of  a  receiver. 

6.  That  the  mortgagor  will  pay  all  taxes,  assessments  or  water  rates,  and  in 
default  thereof,  the  mortgagee  may  pay  the  same. 

7.  That  the  mortgagor  within  six  days  upon  request  in  person  or  within  thirty 
days  upon  request  by  mail  will  furnish  a  statement  of  the  amount  due  on  this 
mortgage. 

8.  That  notice  and  demand  or  request  may  be  in  writing  and  may  be  served 
in  person  or  by  mail. 

9.  That  the  mortgagor  warrants  the  title  to  the  premises. 

10.  That  in  case  of  a  sale,   said  premises,  or  so  much  thereof  as  may  be 
affected  by  this  mortgage,  may  be  sold  in  one  parcel. 

11.  That  the  whole  of  the  principal  sum  shall  become  due  at  the  option  of  the 
mortgagee  after  default  for  thirty  days  after  notice  and  demand  in  the  payment 
of  any  installment  of  any  assessment  for  local  improvement  heretofore  or  here- 


APPENDIX  279 

after  laid  which  is  or  may  become  payable  in  annual  installments,  and  which 
has  affected,  now  affects  or  hereafter  may  affect  the  said  premises,  notwith- 
standing that  such  installments  be  not  due  and  payable  at  the  time  of  such 
notice  and  demand ;  and  also  that  the  whole  of  said  principal  sum  shall  become 
due  at  the  option  of  the  mortgagee  upon  any  default  in  keeping  the  buildings  on 
the  premises  insured  against  loss  by  fire  as  required  by  paragraph  numbered  "2" 
above,  or  immediately  upon  the  actual  or  threatened  demolition  or  removal  of 
any  building  erected  or  to  be  erected  upon  said  premises,  or  if  after  application 
by  any  holder  of  this  mortgage  to  two  or  more  fire  insurance  companies  law- 
fully doing  business  in  the  State  of  New  York  and  issuing  policies  upon  real 
property  situate  in  the  place  where  the  mortgaged  premises  are  situate,  the 
companies  to  which  such  application  has  been  made  shall  refuse  to  issue  such 
policies. 

12.  In  the  event  of  the  passage  after  the  date  of  this  mortgage  of  any  law 
of  the  State  of  New  York,  deducting  from  the  value  of  land  for  the  purposes 
of  taxation  any  lien  thereon,  or  changing  in  any  way  the  laws  for  the  taxation 
of  mortgages  or  debts  secured  by  mortgage  for  State  or  local  purposes,  or  the 
manner  of  the  collection  of  any  such  taxes,  so  as  to  affect  this  mortgage,  the 
holder  of  this  mortgage  and  of  the  debt  which  it  secures,  shall  have  the  right 
to  give  thirty  days'  written  notice  to  the  owner  of  the  land  requiring  the  pay- 
ment of  the  mortgage  debt.     If  such  notice  be  given,  the  said  debt  shall  become 
due,  payable  and  collectible  at  the  expiration  of  said  thirty  days. 

13.  That  the  holder  of  this  mortgage,  in  any  action  to  foreclose  it,  shall  be 
entitled,    (without  notice  and  without  regard  to  the  adequacy  of  any  security 
for  the  debt),  to  the  appointment  of  a  receiver  of  the  rents  and  profits  of  said 
premises;  and  in  the  event  of  any  default  in  paying  said  principal  or  interest, 
such  rents  and  profits  are  hereby  assigned  to  the  holder  of  this  mortgage  as 
further  security  for  the  payment  of  said  indebtedness. 

14.  If  any  action  or  proceeding  be  commenced    (except  an  action  to  fore- 
close this  mortgage  or  to  collect  the  debt  secured  thereby),  to  which  action  or 
proceeding  the  holder  of  this  mortgage  is  made  a  party,  or  in  which  it  becomes 
necessary  to  defend  or  uphold  the  lien  of  this  mortgage,  all  sums  paid  by  the 
holder  of  this  mortgage  for  the  expense  of  any  litigation  to  prosecute  or  defend 
the   rights   and   lien   created   by   this   mortgage    (including   reasonable   counsel 
fees),  shall   be  paid  by  the  mortgagor,  together  with  interest  thereon  at  the 
rate  of  six  per  cent  per  annum,   and   any  such  sum  and  the  interest  thereon 
shall  be  a  lien  on  said  premises,  prior  to  any  right,  or  title  to,  interest  in  or 
claim  upon  said  premises  attaching  or  accruing  subsequent  to  the  lien  of  this 
mortgage,   and  shall   be   deemed  to  be  secured  by  this  mortgage   and  by  the 
bond  which  it  secures.     In  any  action  or  proceeding  to  foreclose  this  mortgage, 
or  to  recover  or  collect  the  debt  secured  thereby,  the  provisions  of  law  respect- 
ing the  recovery  of  costs,  disbursements  and  allowances  shall  prevail  unaf- 
fected by  this  covenant 

15.  This  mortgage  is  made  pursuant  to  a  certain  agreement  for  a  building 

loan  between  the  mortgagor  and  the  mortgagee,  dated 19...,  to  be  filed 

in  the  office  of  the  Clerk  of  the  County  of and  is  subject  to  all  the 

provisions  of  said  agreement 

IN  WITNESS  WHEREOF,  this  mortgage  has  been  duly  executed  by  the 
mortgagor. 

IN  PRESENCE  OF: 


(ACKNOWLEDGMENT) 


280    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  56 

CERTIFICATE  OF  COMPLETION  OF  BUILDING 

do.,  hereby  certify  that  the  building  erected  on  the  premises 

has  been  fully  completed,  and  that  the  mortgage  covering  said  premises  made 

by   to   to  secure    dollars  and  interest, 

dated ,  19. .,  and  recorded  in  the  office  of  the County  of , 

on  the day  of ,  19. .,  in  liber ,  page of  mortgages, 

in  section ,  block shall  from  the  date  hereof  bear  interest  at  and 

after  the  rate  of per  centum  per  annum. 

This    certificate    is    made,    according    to    the    terms    of    said    above    recited 
mortgage... 

IN  WITNESS  WHEREOF,  the  said   has  hereunto  set  his  hand  and 

seal  the day  of 192... 

IN  THE  PRESENCE  OF 

[L8.] 

(ACKNOWLEDGMENT) 


No.  57 

MEASUREMENT  TABLES 

TABLE  OF  LINEAR  MEASURE 


12  inches  (in.)  make 

3  feet 


$y2  yard  or  16^  feet 
40  rods 
8  furlongs  or  320  rods 


foot,   marked  ft. 

yard,  marked  yd. 

rod,  marked   rd. 

furlong,   marked    fur. 

statute  mile,  marked  mi. 


TABLE  OF  SQUARE  MEASURE 


144  square  inches    (sq.  in.)         make 
9  square  feet 


" 


square  yards 
40  square  rods 

4  roods  " 

640  acres 


square  foot,  marked   sq.  ft 

square  yard,  marked sq.  yd. 

square  rod,  marked sq.  rd. 

rood,  marked R. 

acre,   marked    A. 

square  mile,  marked sq.  mi. 


TABLE  OF  SURVEYOR'S  LINEAR  MEASURE 

7.92  inches  (in.)  make  1  link  1. 

25  links  "  1  rod  rd. 

4  rods  or  66  feet  "  1  chain  ch. 

80  chains  "  1  mile  .  ..mi. 


APPENDIX 

TABLE  OF  SURVEYOR'S  SQUARE  MEASURE 


281 


make 

H 


625  square  links  (sq.  1.) 

16  poles 

10  square  chains 
640  acres 

36  square  miles   (6  mi.. square)   " 


pole    P. 

square  chain   sq.  ch. 

acre    A. 

square  mile   sq.  mi. 

township    Tp. 


No.  57a 


RULES  FOR  MEASURING  LAND 

The  following  rules  will  be  found  of  service  in  many  cases  that  may  arise 
in  land  parceling,  particularly  in  the  computation  of  areas. 

To  find  the  area  of  a  four-sided  tract,  whose  sides  are  perpendicular  to  each 
other  (called  rectangle)  :  Multiply  the  length  by  the  breadth,  and  the  product 
will  be  the  area. 

To  find  the  area  of  a  four-sided  tract,  whose  opposite  sides  are  parallel,  but 
whose  angles  are  not  necessarily  right  angles  (called  a  parallelogram) : 
Multiply  the  base  by  the  perpendicular  height,  and  the  product  will  be  the 
area. 

To  find  the  area  of  a  three-sided  tract  (called  a  triangle) :  Multiply  the 
base  by  half  of  the  perpendicular  height,  and  the  product  will  be  the  area. 

To  find  the  area  of  a  four-sided  tract,  having  two  of  its  sides  parallel  (called 
a  trapezoid)  :  Multiply  half  the  sum  of  the  two  parallel  sides  by  the  perpen- 
dicular distance  between  these  sides,  and  the  product  will  be  the  area. 

To  ascertain  the  contents  of  a  tract,  bounded  by  four  straight  lines,  of  which 
no  two  are  parallel  to  each  other  (called  a  trapezium),  and  the  length  of  each 
line  is  ascertained,  and  the  two  opposite  angles  are  supplements  of  each  other) : 
Add  all  the  four  sides  together,  and  halve  their  sum;  subtract  separately  each 
side  from  that  sum;  and  the  four  remainders  thus  obtained  multiply  continually 
together,  and  extract  the  square  root  of  the  last  product.  The  result  will  be 
the  contents  or  area  of  the  tract.  OR,  divide  the  tract  by  lines  into  triangles 
and  trapezoids,  and  ascertain  and  add  together  their  several  areas, — the  sum 
of  which  will  be  the  area  of  the  tract  proposed. 

Land  bounded  by  an  irregular  line — as  a  stream  of  water,  or  a  winding  road 
— is  measured  as  follows,  viz.:  Draw  a  base  line  as  near  as  practicable  to  the 
actual  line  of  the  road  or  stream;  and  at  different  places  in  the  base  line,  equi- 
distant from  each  other,  take  the  distance  to  the  line  of  the  stream  or  road. 
Add  the  sum  of  all  the  intermediate  lines  (or  breadths)  to  half  the  sum  of  the 
first  breadth  and  last  breadth,  and  multiply  the  sum  thus  obtained  by  the  com- 
mon distance  between  the  breadths.  The  result  will  be  the  area  of  the  land  in 
question. 

Should  the  breadths  be  measured  at  unequal  distances  on  the  base  line,  add 
all  the  breadths  together,  and  divide  their  amount  by  the  number  of  breadths 
for  the  mean  breadth,  and  multiply  the  quotient  so  obtained  by  the  length  of  the 
base  line. 


282    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  58 

SPECIMEN  OF  ABSTRACT  OF  TITLE 

ABSTRACT  OF  TITLE 

OF 
JOHN  JONES 

to  the  premises  shown  on  the  following  diagram  and  more  particularly  de- 
scribed   below :    

(Here  insert  diagram  and  written  description.) 

(Few  titles  are  now  searched  back  to  the  sovereign.  In  most  ccses  title  is 
assumed  good  in  some  large  tract  at  some  early  date.  In  this  specimen  abstract 
the  first  deed  is  assumed  to  come  out  of  the  owner  of  a  large  farm  and  to 
convey  a  portion  thereof.) 


WILLIAM  BROWN  AND  MARY  WARRANTY  DEED 

BROWN,  HIS  WIFE,  Dated  Sept.  19,  1864 

TO  Ack.  Sept.  22,  1864 

JACOB  HERMANCE.  Rec.  Sept.  24,  1864 

Bk.  21  page  23 

Conveys  a  large  plot  of  land  including  the  premises  under  examination. 


JACOB  HERMANCE    (Unmarried)  DEED 

to  Dated  Nov.  12,  1880 

PHILIP  SCHOONMAKER  Ack.  Nov.  12,  1880 

Rec.  Dec.  6,  1880 
Bk.  96  page  187 

Conveys  the  premises  under  examination. 


In  the  Matter  of  the  Estate  of  PETITION 

PHILIP  SCHOONMAKER,  Dated  Jan.  19,  1898 

Deceased. 


The  petition  of  Josephine  Schoonmaker  shows  that  she  is  the  widow  and  the 
Executrix  named  in  the  last  Will  and  Testament  of  Philip  Schoonmaker,  de- 
ceased, who  departed  this  life  at  on  January  1,  1898.  The  petition 

further  shows  that  the  heirs  and  next  of  kin  are  as  follows:  Arthur  Schoon- 
maker, Isaac  Schoonmaker,  and  Charles  Schoonmaker,  and  that  the  above  are 
the  only  children  and  all  of  full  age. 


APPENDIX  283 

Last  Will  and  Testament  of  WILL 

PHILIP  SCHOONMAKER.  Dated  Jan.  31,  1887 

Proved  Feb.  6,  1898 
Recorded  in  Bk.  103  of 

Wills,  page  392. 
The  said  WILL 
1st:  Orders  all  debts  paid. 

2nd:  Devises  all  property  of  every  kind  and  nature  to  Josephine  Schoonmaker, 
wife  of  Philip  Schoonmaker,  who  is  appointed  Executrix. 


JOSEPHINE   SCHOONMAKER  DEED 

widow  of  PHILIP  SCHOONMAKER,  Dated  Feb.  23,  1908 

to  Ack.  Feb.  23,  1908 

ARTHUR  W.  VAN  WINKLE.  Rec.  March  18,  1908 

Bk  221,  page  353. 

Conveys  the  premises  under  examination. 


ARTHUR  W.  VAN  WINKLE  MORTGAGE 

and  IDA  VAN  WINKLE,  his  wife,  Dated  May  1,  1916 

to  Ack.  May  1,  1916 

PHILIP  GIBBS.  Rec.  May  2,  1916 

Bk.  402,  page  661. 

Conveys  the  premises  under  examination  to  secure  payment  of  $3,000  due 
May  1,  1919,  with  interest  from  date  at  6%  per  annum,  payable  May  and 
November  1st 


(The  abstract  of  title  is  generally  Triads  for  the  purpose  of  a  mortgage  or  sale 
and  the  abstract  being  made  for  the  purchaser  or  the  lender  it  is  customary  to 
insert  at  this  point  a  memorandum  of  the  final  instrument  by  which  the  sale  or 
loan  is  consummated.) 

THIS  IS  TO  CERTIFY  that  I  have  searched  the  records  in  the  office  of  the 

Clerk  of  the  County  of State for  deeds,  mortgages,  judgments 

and  all  other  liens  affecting  the  title  to  the  premises  described  at  the  head  of 
this  abstract  and  find  nothing  affecting  the  same  except  as  herein  set  forth. 


Attorney  at  Law. 


(The  abstract  above  states  only  the  result  of  the  examination  of  the  instru- 
ments on  record  in  the  office  of  the  County  Clerk,  Surrogate  and  Registrar. 
In  the  examination  of  title  it  is  customary  to  examine  the  records  of  the  appro- 
priate United  States  Court  for  bankruptcies  and  the  records  of  the  appropriate 
offices  for  taxes,  assessments  and  water  charges.  Where  this  is  done  certificates 
of  such  searches  are  usually  attached  to  the  abstract.) 


284   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  59 

SPECIMEN  OF  SURVEY 


BAINBRIDGE 


•STREET 


I*S  \J.\J 


No.  60 

UPON  THE  CLOSING  OF  TITLE  THE  SELLER 
SHOULD  BE  PREPARED  WITH  THE  FOLLOWING 

1.  Seller's  copy  of  the  contract. 

2.  The  latest  tax,  water  and  assessment  receipted  bills. 

3.  Latest  possible  water  meter  reading. 

4.  Receipts  for  last  payment  of  interest  on  mortgages. 

5.  Originals  and  certificates  of  all  fire,  liability  and  other  insurance  policies. 

6.  Estoppel   certificates   from   the   holder   of   any   mortgage   which  has   been 
reduced  showing  the  amount  due  and  the  date  to  which  interest  is  paid. 

7.  Any  subordination  agreements  which  may  be  called  for  in  the  contract. 

8.  Satisfaction   pieces   of   mechanics    liens,    chattel    mortgages,   judgments   or 
mortgages  which  are  to  be  paid  at  or  prior  to  the  closing. 


APPENDIX  285 

9.  List  of  names  of  tenants,  amounts  of  rents  paid  and  unpaid,  dates  when 
rents  are  due  and  assignment  of  unpaid  rents. 

10.  Assignment  of  leases. 

11.  Letters  to  tenants  to  pay  all  subsequent  rent  to  the  purchaser. 

12.  Affidavit  of  title. 

13.  Authority  to  execute  deed  if  the  seller  is  acting  through  an  agent. 

14.  Bill  of  Sale  of  personal  property  covered  by  the  contract. 

15.  Seller's  last  deed. 

16.  Have  any  unrecorded  instruments  affecting  the  title  including  extension 
agreements. 

17.  Deed  and  other  instruments  which  the  seller  is  to  deliver  or  prepare. 


No.  61 

UPON  THE  CLOSING  OF  TITLE  THE  PURCHASER 
SHOULD  BE  PREPARED  WITH  THE  FOLLOWING 

1.  Purchaser's  copy  of  contract. 

2.  Abstract  of  title. 

3.  Report  of  title. 

4.  Examine  deed  to  see  if  *t  conforms  to  the  contract. 

5.  Compare  description. 

6.  See  that  deed  is  properly  executed. 

7.  Have   sufficient  cash  or  certified  checks  to  make   payments   required   by 
contract. 

8.  See  that  all  liens  which  must  be  removed  are  properly  disposed  of. 

9.  Obtain  names  and  details  with  reference  to  tenants  and  rents. 

10.  Obtain  assignment  of  unpaid  rents  and  assignment  of  leases. 

11.  Obtain    and    examine   estoppel    certificates    with    reference    to   mortgages 
which  have  been  reduced. 

12.  Obtain  letter  to  tenants. 

13.  Obtain  affidavit  of  title. 

14.  Obtain  and  examine  authority  if  the  seller  acts  through  an  agent. 

15.  Obtain  Bill  of  Sale  of  personal  property  covered  by  the  contract. 

16.  Obtain  any  old  deeds  which  the  seller  may  have. 

17.  Examine  survey. 

18.  See  if  report  of  title  shows  any  covenants,  restrictions  or  consents  affect- 
ing the  title  or  use  of  the  property. 

19.  Have  bills  for  any  unpaid  tax,  water  or  assessments  and  have  interest 
computed  up  to  the  date  of  closing. 

20.  Make  adjustments  as  called  for  in  the  contract. 

21.  Examine  purchase  money  mortgages  and  duly  execute  them. 

22.  Have  damage  award,   if  any,  for  public  improvements   assigned  to  the 
purchaser. 

23.  Obtain  any  unrecorded  instruments  affecting  the  title  including  extension 
agreements. 


286    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  62 

AFFIDAVIT  OF  TITLE 

STATE  OF  NEW  YORK-, 

Us.: 
County  of J 

being  duly  sworn,  says,  that  he  resides  at  and  is  by 

occupation   ;  that  he  is  a  citizen  of  the  United  States,  twenty-one 

years  of  age  and  upwards ;  and  that  he  is  now  in  possession,  and  the  owner  in 

fee  simple,  of  the  premises  known  as in this  day  to  be 

by  him  to 

Deponent  further  says  that  the  said   premises   have   been   held  by  him  for 

upwards  of years  last  past,  and  that  his  possession  thereof  has  been 

peaceable  and  undisturbed,  and  that  the  title  thereto  has  never  been  disputed, 
questioned  or  rejected,  to  his  knowledge,  nor  does  deponent  know  of  any  facts 
by  reason  of  which  said  possession  or  title  might  be  disturbed,  or  questioned, 
or  by  reason  of  which  any  claim  to  said  premises,  or  any  part  thereof,  or  any 
interest  therein  adverse  to  him,  might  arise,  or  be  set  up  adverse  to  this  de- 
ponent; and  that  he  is  informed  and  believes  that  his  grantors  held  the  said 
premises  for  more  than  twenty  years  prior  to  the  transfer  to  him;  and  that  no 
person  has  any  contract  for  the  purchase  of,  or  claim  to  or  against  said  prem- 
ises, except  as  hereinafter  stated ;  and  that  the  same  are  now  free  and  clear  of 
all  taxes,  incumbrances  or  liens  by  mortgage,  decree,  judgment  or  by  statute, 
or  by  virtue  of  any  proceedings  by  or  against  him  in  any  court  or  before  any 
officer  of  any  State  or  of  the  United  States,  or  filed  in  the  office  of  the  clerk  of 
any  county  or  court  in  this  State,  or  in  any  State  or  the  United  States  and  of  all 
other  liens  of  every  nature  and  description,  save  and  except 


or  have  any  proceedings  in  bankruptcy  ever  been  instituted  by  or  against  the 
deponent  in  any  court  or  before  any  officer  of  any  State,  or  of  the  United 
States,  or  has  deponent  at  any  time  made  an  assignment  for  the  benefit  of 
creditors. 

Deponent  further  says  that  he  is  married  to*  and  who  is 

the  same  person  who  executed,  with  deponent,  the to  the  said  premises ; 

and  that  there  are  no  judgments,  or  decrees,  or  attachments,  or  orders  of  any 
court  or  officer  for  the  payment  of  money  against  him,  or  to  which  he  is  a 
party,  unsatisfied  or  not  canceled  of  record  in  any  of  the  courts,  or  before  any 
officer  of  the  United  States,  or  this  State,  or  any  suit  or  proceedings  pending 
anywhere  affecting  said  premises,  to  his  knowledge,  information  or  belief  and 

that  any  judgments  found  of  record  against  any  person  under  the  name 

are  not  against  deponent. 

Deponent  makes  this  affidavit  to  induce above  named,  to  accept  a 

said  premises,  and  pay  the  consideration  therefor,  knowing  that  said 

relies  upon  the  truth  of  the  statements  herein  contained. 


Sworn  to  before  me,  this 
day  of 


*In  case  deponent  is  a  single  man,  a  widower,  or  if  he  has  been  divorced 
for  his  fault  or  not,  such  facts  should  be  substituted. 


APPENDIX  287 

No.  63 

ESTOPPEL  CERTIFICATE— FROM  OWNER 


THE  UNDERSIGNED,  owning  the  premises  situate  in  the 
shown  on  the  following  diagram 


covered  by  a  mortgage  for  $ and  interest,  dated  ,  1  . . . .,  and 

recorded  in  the  office  of  the  of  the  County  of  ,  in 

liber  ,  page  ,  of  mortgages,  in  Section  ,  which  mortgage  is 

about  to  be  assigned  by the  holder  to  ;  hereby  certifies, 

in  consideration  of  one  dollar  paid  and  to  enable  said  assignment  to  be  made 

and  accepted,  that  said  mortgage,  so  to  be  assigned,  is  a  valid lien  on 

said  premises  for  the  full  amount  of  principal  and  interest  due  thereon,  namely 

$ with  interest  at  per  cent  per  annum  from  ,  19 , 

and  that  there  are  no  defenses  or  offsets  to  said  mortgage,  or  to  the  bond  which 
it  secures. 

The  undersigned  further  certifies  that  all  the  other  provisions  of  said  bond 
and  mortgage  are  unmodified  and  in  force. 

Dated  day  of 19.... 

WITNESS, 


(ACKNOWLEDGMENT) 


No.  64 

ESTOPPEL  CERTIFICATE— FROM  JUNIOR 
MORTGAGEE 

THE  UNDERSIGNED,  the  owner  and  holder  of certain  mortgage.., 

for dollars, and  interest dated  the day  of 

1 . . . .,  and  recorded  in  the  office  of  the of  the  County  of on 

the day  of 1  in  liber of  mortgages,  page , 

in  Section    ,  which  mortgage  cover.,   certain  premises  situate  in  the 

which  premises  are  also  covered  by  a  mortgage  for  dollars  and  in- 
terest dated 1 ,  and  recorded  in  said office  on , 

1 ,  in  liber  of  mortgages,  page  in  Section  ,  which  last 

mentioned  mortgage  is  about  to  be  assigned  by the  holder  thereof  to 

hereby  certifies,  in  consideration  of  one  dollar  paid  and  to  enable 

said  assignment  to  be  made  and  accepted,  that  said  last  mentioned  mortgage, 

so  to  be  assigned,  is  a  valid  lien  upon  the  said  premises  for  the 

full  amount  of  principal  and  interest  due  thereon,  namely,  $ with  in- 
terest at per  cent  per  annum  from  the  day  of ,  19 . . . ., 

and  that  there  are  no  defenses  or  offsets  to  said  mortgage,  or  to  the  bond  which 
it  secures. 

The  undersigned  further  certifies  that  all  the  other  provisions  of  said  last 
mentioned  bond  and  mortgage  are  unmodified  and  in  force. 

Dated  the day  of 192. . 

WITNESS,  


(ACKNOWLEDGMENT) 


288    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  65 

BILL  OF  SALE— WITH  AFFIDAVIT  OF  TITLE 

KNOW  ALL  MEN  BY  THESE  PRESENTS,  THAT of  the  first  part,  for 

and  in  consideration  of  the  sum  of lawful  money  of  the  United  States, 

to in  hand  paid,  at  or  before  the  ensealing  and  delivery  of  these  presents, 

by   of  the  second  part,  the  receipt  whereof  is  hereby  acknowledged, 

ha.,  bargained  and  sold,  and  by  these  presents  do.  .  grant  and  convey  unto  the 
said  part.,   of  the  second  part,    executors,  administrators  and   assigns, 


TO  HAVE  AND  TO  HOLD  the  same  unto  the  said  part. .  of  the  second  part, 

executors,  administrators  and  assigns  forever.    And do. .,  for 

heirs,  executors  and  administrators,  covenant  and  agree  to  and  with  the  said 

part. .  of  the  second  part,  to  warrant  and  defend  the  sale  of  the  said 

hereby  sold  unto  the  said  part.,  of  the  second  part, executors,  adminis- 
trators and  assigns,  against  all  and  every  person  and  persons  whomsoever. 

IN  WITNESS  whereof,  have  hereunto  set  hand  and  seal  this 

day  of one  thousand  nine  hundred 

Sealed  and  delivered  in  the  Presence  of 


[L.S.] 


STATE  OF 
CITY  OF 
COUNTY  OF 


being  duly  sworn,  deposes  and  says  that  ..h..  resides  at  .................... 

in  the  Borough  of  ........  ,  in  the  City  of  ........ 

That  ..h..  is  the  same  person  who  executed  the  within  bill  of  sale. 

That  .  .h.  .  is  the  sole  and  absolute  owner.  .  of  the  property  described  in  said 
bill  of  sale,  and  each  and  every  part  thereof,  and  has  full  right  to  sell  and 
transfer  the  same. 

That  the  said  property,  and  each  and  every  part  thereof,  is  free  and  clear  of 
any  and  all  liens,  mortgages,  debts  and  other  incumbrances  or  claims  of  what- 
soever kind  or  nature. 

That  ..h..  is  not  indebted  to  anyone  and  has  no  creditors. 

That  there  are  no  judgments  existing  against  ..h..,  in  any  Court,  nor  are 
there  any  replevins,  attachments,  or  executions  issued  against  ..h..  now  in 
force;  nor  has  any  petition  in  bankruptcy  been  filed  by  or  against  ..h.. 

That  this  affidavit  is  made  for  the  purpose  and  with  the  intent  of  inducing 

to  purchase  the  property  described  in  said  bill  of  sale,  knowing  that  ..h..  will 
rely  thereon  and  pay  a  good  and  valuable  consideration  therefor. 

Sworn  to  before  me  this  .............. 

day  of  ......................  192..  ...............  ....... 


(ACKNOWLEDGMENT) 


APPENDIX  289 

No.  66 

FORM  OF  STATEMENT  OF  CLOSING  TITLE 

TITLE  TO  PREMISES  NO closed  . . .  (date) ...  at (place) .... 

present    (name   persons   attending  closing) Title   closed   by   delivery 

of  following  instruments: 


DEED  Dated    

Recorded    by 

to  To  be  returned  to 


MORTGAGE  Dated    

Recorded    by 

to  To  be  returned  to 


Terms  of  mortgage 


INSURANCE   (insert  memo,  of  names  and  details  of  policies,  changes  to  be 
made  and  by  whom). 

STATEMENT  OF  ADJUSTMENTS 

Cr.  Dr. 

Purchase  price   $ 

Paid  on  signing  contract   $ 

Mortgage  held  by   $ 

Interest  from to   at %     $ 

Purchase  money  mortgage   $ 

Insurance     $ 

Rent    $ (or)$ 

Other  items    $ (or)$ 


Total  credits    $ $, 


Total  debits   

Total  credits  brought  over $. 


Balance  paid    $ 

EXPENSES   (insert  memo,  of  fees  and  expenses  for  drawing  and  recording 
papers  and  by  whom  paid. 


No.  67 

LEASE 

THIS  INDENTURE,  made  the   day  of  one  thousand  nine 

hundred   BETWEEN    

party  of  the  first  part,  and 

Party 

of  the  second  part  WITNESSETH,  That  the  said  part.,  of  the  first  part  ha.. 
letten  and  by  these  presents  do.,  grant,  demise,  and  to  farm  let,  unto  the  said 
part.,  of  the  second  part,  and  the  said  part  of  the  second  part  ha.,  hired  and 
taken  and  by  these  presents  do.,  hire  and  take  of  and  from  said  part.,  of  the 


290    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

first  part,  


with  the  appurtenances,  for  the  term  of from  the day  of 

one  thousand  nine  hundred  at  the  yearly  rent  or  sum  of 

to  be  paid  in equal payments,   


AND  it  is  agreed  that  if  any  rent  shall  be  due  and  unpaid,  or  if  default 
shall  be  made  in  any  of  the  covenants  herein  contained  then  it  shall  be  lawful 
for  the  said  part.,  of  the  first  part  to  re-enter  the  said  premises  and  the  same 
to  have  again,  to  re-possess  and  enjoy. 

AND  the  said  part.,  of  the  second  part  do.,  covenant  to  pay  unto  the  said 
part. .  of  the  said  yearly  rent  as  herein  specified. 


AND  that  at  the  expiration  of  the  said  term  the  said  part. .  of  the  second 
part  will  quit  and  surrender  the  premises  hereby  demised,  in  as  good  state 
and  condition  as  reasonable  use  and  wear  thereof  will  permit,  damages  by  the 
elements  excepted. 

AND  the  said  part.,  of  the  second  part  do.,  hereby  expressly  covenant  and 
agree,  that  if  the  said  demised  premises  shall  become  vacant  at  any  time  during 

the  said  term,  the  said  part. .  of  the  first  part  and  legal  representatives 

or  assigns  may  re-enter  the  same  by  force  or  otherwise  without  being  liable  to 
any  prosecution  therefor,  and  may  relet  the  said  premises  as  the  agent  and  for 
account  of  the  said  part. .  of  the  second  part,  and  receive  the  rent  thereof, 

applying  the  same  first  to  the  payment  of  such  expense  as  may  be  put 

to  in  re-entering  and  reletting,  and  then  to  the  payment  of  the  rent  due  by  these 
present,  with  interest,  and  the  balance,  if  any,  to  be  paid  over  to  the  said  part. . 
of  the  second  part,  and  any  deficiency  which  may  arise  the  said  part. .  of  the 
second  part  hereby  covenant  to  pay  in  full. 

AND  the  said  part.,  of  the  first  part  do.,  covenant  that  the  said  part.,  of 
the  second  part,  on  paying  the  said  yearly  rent,  and  performing  the  covenants 
aforesaid,  shall  and  may  peaceably  and  quietly  have,  hold  and  enjoy  the  said 
demised  premises  for  the  term  aforesaid. 

WITNESS  our  hands  and  seals  the  day  and  year  first  above  written. 
In  the  presence  of 


No.  68 

LEASE— GILSEY  FORM 

THIS  AGREEMENT  between  as  landlord,  and  as 

Tenant..   WITNESSETH :— That  the  said  Landlord.,    let  unto  the  said  Ten- 
ant. .  and  the  said  Tenant. .  hired  from  the  said  Landlord 


for  the  term  to  be  used  and  occupied  upon  the  conditions 

and  covenant  following: 

1st.  That  the  Tenant. .  shall  pay  the  rent  


APPENDIX  291 

2d.  That  the  Tenant. .  shall  take  good  care  of  the  premises  

and  at  the  end  or  other  expiration  of  the  term  shall  deliver  up  the  demised 
premises  in  good  order  or  condition,  damages  by  the  elements  excepted. 

3d.  That  the  Tenant.,  shall  promptly  execute  and  comply  with  all  statutes, 
ordinances,  rules,  orders,  regulations  and  requirements  of  the  Federal,  State 
and  City  Government,  and  of  any  and  all  their  Departments  and  Bureaus  ap- 
plicable to  said  premises,  for  the  correction,  prevention,  and  abatement  of 
nuisances  or  other  grievances,  in,  upon  or  connected  with  said  premises  during 
said  term;  and  shall  also  promptly  comply  with  and  execute  all  rules,  orders, 
and  regulations  of  the  New  York  Board  of  Fire  Underwriters  for  the  pre- 
vention of  Fires,  at own  cost  and  expense. 

4th.  That  the  Tenant  shall  not  assign  this  Agreement,  or  underlet  or  under- 
lease the  premises  or  any  part  thereof,  or  make  any  alterations  on  the  premises, 
without  the  Landlord.,  consent  in  writing;  or  occupy,  or  permit  or  suffer  the 
same  to  be  occupied  for  any  business  or  purpose  deemed  disreputable  or  extra- 
hazardous  on  account  of  fire,  under  the  penalty  of  damage  and  forfeiture. 

5th.  That  the  Tenant  shall,  in  case  of  fire,  give  immediate  notice  thereof 
to  the  Landlord.,  who  shall  thereupon  cause  the  damage  to  be  repaired  forth- 
with; but  if  the  premises  be  so  damaged  that  the  Landlord.,  shall  decide  to 
rebuild,  the  term  shall  cease  and  the  accrued  rent  be  paid  up  to  the  time  of 
the  fire. 

6th.  The  said  Tenant. .  agree. .  that  the  said  Landlord  and  Agents,  and  other 
representatives,  shall  have  the  right  to  enter  into  and  upon  said  premises,  or 
any  part  thereof,  at  all  reasonable  hours  for  the  purpose  of  examining  the 
same,  or  making  such  repairs  or  alterations  therein  as  may  be  necessary  for 
the  safety  and  preservation  thereof. 

7th.  The  Tenant.,   also  agree.,  to  permit  the  Landlord  or agents  to 

show  the  premises  to  persons  wishing  to  hire  or  purchase  the  same;  and  the 
Tenant.,  further  agree.,  that  on  and  after  next  preceding  the  ex- 
piration of  the  term  hereby  granted,  the  Landlord  or Agents  shall  have 

the  right  to  place  notices  on  the  front  of  said  premises,  or  any  part  thereof, 
offering  the  premises  "To  Let"  or  "For  Sale,"  and  the  Tenant. .  hereby  agree., 
to  permit  the  same  to  remain  thereon  without  hindrance  or  molestation. 

8th.  That  if  the  said  premises,  or  any  part  thereof,  shall  become  vacant  dur- 
ing the  said  term,  the  Landlord.,  or  representatives  may  re-enter  the 

same,  either  by  force  or  otherwise,  without  being  liable  to  prosecution  therefor ; 
and  re-let  the  said  premises  as  the  Agent  of  the  said  Tenant  .  and  receive  the 

rent  thereof,  applying  the  same,  first  to  the  payment  of  such  expenses  as 

he  may  be  put  to  in  re-entering,  and  then  to  the  payment  of  the  rent  due  by 
these  presents;  the  balance  [if  any]  to  be  paid  over  to  the  Tenant.,  who  shall 
remain  liable  for  any  deficiency. 

9th.  That  in  case  of  any  damage  or  injury  occurring  to  the  glass  in  the 

or  damage  and  injury  to  the  said  premises  of  any  kind  whatsoever,  said  dam- 
age or  injury  being  caused  by  the  carelessness,  negligence  or  improper  conduct 
on  the  part  of  the  said  Tenant..  Agents  or  Employees,  then  the  said  Tenant., 
shall  cause  the  said  damage  or  injury  to  be  repaired  as  speedily  as  possible 
at own  cost  and  expense. 

10th.  That  the  Tenant.,  shall  neither  encumber  nor  obstruct  the  sidewalk  in 
front  of,  entrance  to  or  halls  and  stairs  of  said  building,  nor  allow  the  same 
to  be  obstructed  or  encumbered  in  any  manner. 

llth.  The  Tenant  shall  neither  place,  or  cause,  or  allow  to  be  placed,  any 

sign  or  signs  of  any  kind  whatsoever  at,  in  or  about  the  entrance  to  said 

except  in  or  at  such  place  or  places  as  may  be  indicated  by  the  said  Landlord., 
and  consented  to  by  in  writing.  And  in  case  the  Landlord.,  or 


292    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

representative  shall  deem  it  necessary  to  remove  any  such  sign  or  signs  in 
order  to  paint  the or  make  any  other  repairs,  alterations  or  improve- 
ments in  or  upon  said  or  any  part  thereof,  they  shall  have  the  right 

to  do  so,  providing  they  cause  the  same  to  be  removed  and  replaced  at 

expense,  whenever  the  said  repairs,  alterations  or  improvements  shall  have  been 
completed. 

12th.  It  is  expressly  agreed  and  understood  by  and  between  the  parties  to 
this  agreement,  that  the  Landlord.,  shall  not  be  liable  for  any  damage  or  in- 
jury by  water,  which  may  be  sustained  by  the  said  Tenant.,  or  other  person; 
or  for  any  other  damage  or  injury  resulting  from  the  carelessness,  negligence, 
or  improper  conduct  on  the  part  of  any  other  Tenant. .  or  Agents,  or  Em- 
ployees, or  by  reason  of  the  breakage,  leakage,  or  obstruction  of  the  City  Water 
or  soil  pipes,  or  other  leakage  in  or  about  the  said  building. 

13th.  That  if  default  be  made  in  any  of  the  covenants  herein  contained,  then 
it  shall  be  lawful  for  the  said  Landlord.,  to  re-enter  the  said  premises,  and 
the  same  to  have  again,  re-possess  and  enjoy.  The  said  Tenant. .  hereby 
expressly  waive  the  service  of  any  notice  in  writing  of  intention  to  re-enter,  as 
provided  for  in  $1505  of  the  Code  of  Civil  Procedure  and  in  the  third  section 
of  an  Act  entitled  "An  Act  to  abolish  Distress  for  Rent  and  for  other  purposes" 
passed  May  13,  1846.  (Applies  to  New  York.) 

And  the  said  Landlord.,  doth  covenant  that  the  said  Tenant.,  on  paying  the 
said  yearly  rent,  and  performing  the  covenants  aforesaid,  shall  and  may  peace- 
ably and  quietly  have,  hold  and  enjoy  the  said  demised  premises  for  the  term 
aforesaid. 

And  it  is  further  understood  and  agreed,  that  the  covenants  and  agreements 
herein  contained  are  binding  on  the  parties  hereto  and  their  legal  repre- 
sentatives. 

IN  WITNESS  WHEREOF  the  parties  hereto  have  hereunto  set  their  hands 
and  seals  this day  of one  thousand  nine  hundred  and 

Sealed  and  delivered  in  the  presence  of 


No.  69 

SPECIMEN  OF  LONG  FORM  OF  LEASE 

THIS  INDENTURE,  made  the day  of in  the  year  one  thou- 
sand nine  hundred  and ,  between  REALTY  ASSOCIATES,  a  corporation 

organized  under  the  laws  of  the  State  of  New  York,  hereinafter  designated  as 
Landlord,  and  hereinafter  designated  as  Tenant, 

WITNESSETH,  that  the  Landlord  has  agreed  to  let  and  hereby  does  let, 
and  the  Tenant  has  agreed  to  hire,  and  hereby  does  hire  from  the  Landlord 
all  that  portion  of  the  premises  in  the  Borough  of  Brooklyn,  County  of  Kings, 

City  and  State  of  New  York,  known  as  and  by  the  street  number more 

fully  described  as  follows :  

;  for  a  term  of which  term  shall  commence  on  the day  of 


APPENDIX  293 

and  end  on  the day  of ,  unless  sooner  terminated  as  hereinafter 

provided,  for  the  total  rent  or  sura  of dollars. 

AND  THE  TENANT  COVENANTS  AND  AGREES: 
1st.  To  pay  the  rent  as  aforesaid  as  follows: 


2d.  To  make  all  repairs,  both  exterior  and  interior,  and  also  all  repairs  to 
elevators  and  elevator  machinery,  and  any  other  apparatus  belonging  to  the 
building,  and  the  Landlord  shall  not  be  liable  for  any  manner  of  repairs  in  or 
about  said  premises  or  to  any  part  of  the  street,  sidewalk  or  vaults  in  front 
thereof; 

In  case  of  default  by  the  Tenant  under  this  paragraph,  then,  and  in  that 
event,  the  Landlord,  its  successors  or  assigns,  may  make  such  repairs  as  may 
be  necessary,  and  all  necessary  expenses  consequent  thereupon  shall  be  borne 
by  the  Tenant  and  shall  be  deemed  collectible  as  additional  rent,  and  shall 
become  due  and  payable  by  the  Tenant  to  the  Landlord  immediately  after  the 
same  shall  have  been  paid  or  incurred  by  the  Landlord,  and  the  Landlord 
shall  have  the  right  to  enter  in  upon  said  premises  to  make  such  repairs; 

3d.  IN  CASE  the  Tenant  shall  have  repairs  made  to  the  building  and  a 
lien  shall  be  filed  upon  the  premises,  forthwith  to  take  such  action  as  will 
remove  the  lien  from  the  premises,  and  in  default  thereof  for  ten  days  after 
notice,  the  Landlord  may  pay  the  amount  of  such  lien  or  discharge  the  same  by 
deposit  and  the  amount  so  paid  or  deposited  shall  be  deemed  additional  rent 
reserved  under  this  lease  and  payable  with  interest  from  the  date  of  such 
payment  upon  the  next  day  upon  which  rent  shall  accrue  under  this  lease; 

4th.  To  make  good  all  damage  resulting  from  misuse  or  neglect; 

5th.  To  take  good  care  of  the  premises  and  suffer  no  waste  or  injury; 

6th.  To  pay  as  additional  rent  on  or  before  the  thirty-first  day  of  July  in 
each  and  every  year  a  sum  equal  to  all  charges  which  may  be  made  for  the 
use  or  rent  of  Croton  or  other  water  in  said  premises,  and  also  to  pay  within 
sixty  days  after  the  same  shall  have  become  payable,  all  taxes  imposed  on  said 
premises,  except  as  follows,  

7th.  To  pay  as  additional  rent  at  all  times  during  the  said  term,  all  pre- 
miums upon  policies  of  fire  insurance  which  may  be  taken  upon  the  said 


premises ; 


8th.  At  all  times  during  the  said  term  at  the  expense  of  the  Tenant  to  insure 
and  keep  insured  in  favor  of  the  Landlord,  all  plate  glass  in  the  store  fronts, 
windows  and  doors  of  the  above  described  premises  in  such  amounts  as  shall 
be  satisfactory  to  the  Landlord,  and  to  furnish  the  Landlord  with  policies  of 
insurance  covering  the  same; 

9th.  In  case  the  Tenant  fails  to  furnish  such  insurance  as  above  provided 
or  to  pay  the  premium  or  premiums  upon  the  same,  or  in  case  the  Tenant  shall 
fail  to  pay  such  water  rates  or  any  charge  or  tax,  as  above  provided,  the 
Landlord  may  in  each  and  every  case  procure  such  insurance  or  pay  such 
amounts  and  may  add  the  amount  of  such  premiums  or  payments  to  the  next 
installment  of  rent  falling  due  and  the  same,  with  interest  thereon  from  the 
date  of  payment,  shall  be  additional  rent  reserved  hereunder,  payable  on  the 
next  day  provided  for  the  payment  of  rent  succeeding  the  payment  of  such 
premiums  or  payments  by  the  Landlord; 


294   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

10th.  To  furnish  the  Landlord  at  all  times  during  the  terra  of  this  lease  with 
security  in  the  sum  of dollars,  which  security  shall  be  furnished  as 

follows :   


llth.  To  allow  the  usual  notice  of  "To  Let"  to  be  placed  upon  the  walls  or 
in  a  conspicuous  place  upon  the  exterior  of  the  said  premises  for  six  months 
prior  to  the  expiration  of  the  term  of  this  agreement,  and  "For  Sale"  notices 
at  any  time  during  the  term,  and  to  permit  such  notices  to  remain  thereon 
without  hindrance  or  molestation,  and  also  to  permit  applicants  to  inspect  the 
interior  of  said  premises  during  such  period  between  the  hours  of  10  A.  M.  and 
5  P.  M.  on  each  and  every  business  day  during  such  time; 

12th.  To  admit  representatives  of  the  Landlord  into  said  premises  at  all 
times  for  the  purpose  of  making  alterations  or  improvements; 

13th.  To  comply  at  the  expense  of  the  Tenant  with  all  rules,  orders,  ordi- 
nances and  regulations  of  each  and  every  department  or  bureau  of  the  City, 
County,  State  or  National  Government  applicable  to  the  said  premises,  and 
of  the  New  York  Board  of  Fire  Underwriters,  whether  usual  or  unusual,  ordi- 
nary or  extraordinary; 

14th.  In  case  of  fire  to  give  immediate  notice  thereof  to  the  Landlord,  which 
shall  cause  the  damage  to  be  repaired  as  speedily  as  possible.  If  the  damage 
be  so  extensive  as  to  render  the  premises  untenantable,  the  rent  shall  be  paid  up 
to  the  date  of  the  fire,  and  shall  cease  until  such  time  as  the  building  shall  be 
put  in  proper  repair,  and  thereafter  the  Tenant  shall  again  pay  the  rent  herein 
reserved,  and  have  no  option  to  cancel  this  lease;  but  if  the  destruction  be 
total,  the  rent  shall  be  paid  up  to  the  time  of  such  destruction,  and  then  and 
from  thenceforth,  this  lease  shall  cease,  provided,  however,  that  such  damage 
or  destruction  be  not  caused  by  the  carelessness,  negligence  or  improper  conduct 
of  the  Tenant,  or  the  servants  or  agents  of  the  Tenant. 

15th.  To  quit  and  surrender  the  premises  at  the  expiration  of  said  term  in  as 
good  state  and  condition  as  they  were  at  the  commencement  of  the  term,  rea- 
sonable use  and  wear  thereof  and  damages  by  the  elements  exempted; 

16th.  Unless  the  written  consent  of  the  Landlord  shall  first  be  obtained,  not  to 

a.  Make  any  alterations  in  the  premises, 

b.  Sublet  the  whole  or  any  part  thereof  for  any  business  which  may  be  ob- 
noxious or  detrimental  to  the  neighborhood, 

c.  Use    the    premises   or    any   part   thereof    for    any   purpose    deemed    extra 
hazardous, 

d.  Assign  this  lease; 

17th.  To  indemnify  and  save  harmless  the  Landlord  for  and  against  any 
and  all  liability,  losses,  damages  and  expenses,  causes  of  action,  suits,  claims 
and  judgments  arising  from  injury  to  person  or  property  of  any  and  every 
nature,  and  for  any  matter  or  thing  growing  out  of  the  occupation  of  the 
demised  premises,  the  demolition  by  the  Tenant  of  the  buildings  now  thereon, 
the  construction  of  any  building  thereon,  or  arising  or  growing  out  of  the  use, 
occupation,  management,  possession  or  control  of  the  demised  premises,  or  of 
any  building  thereon,  or  of  the  streets,  sidewalks  or  vault  adjacent  thereto, 
occasioned  by  the  Tenant,  the  agents,  employees,  assigns  of  the  Tenant  or  by 
sub-tenants,  or  by  their  sub-tenants,  their  agents  or  employees,  sub-tenants  or 
assigns  respectively,  or  which  may  be  occasioned  by  any  person  or  thing  what- 
ever, at  any  time  during  the  term  of  this  lease ; 

18th.  To  hold  the  Landlord  harmless  from  and  indemnified  against  all  dam- 
ages including  Counsel  fees  and  expenses  to  any  person  or  persons  by  reason 
of  an  act  commonly  known  as  the  "Civil  Damage  Law,"  or  any  other  act  of 
similar  purport; 


APPENDIX  295 

19th.  That,  in  case  of  default  on  the  part  of  the  Tenant  or  on  the  part  of 
any  person  or  persons  claiming  through  or  under  the  Tenant  in  the  payment  of 
any  of  the  rents  herein  reserved,  or  reserved  in  any  renewal  hereof,  or  in  the 
performance  on  the  part  of  the  Tenant  of  any  of  the  covenants  contained  herein, 
or  in  any  renewal  hereof,  to  be  kept  and  performed  by  the  Tenant,  neither 
the  Tenant  nor  any  such  person  or  corporation  shall  have  or  claim  any  right 
of  redemption  in  said  premises  under  Sections  2256  or  2257  of  the  Code  of 
Civil  Procedure,  nor  under  any  law  now  in  force  or  hereafter  enacted,  after 
any  termination  of  this  lease  by  re-entry  by  the  Landlord  or  by  its  obtaining 
possession  under  summary  proceedings  or  otherwise  in  any  lawful  manner;  and 
the  said  Tenant  for  the  Tenant  and  every  such  person  hereby  releases  all  such 
right  of  redemption ;  AND  the  Tenant  for  the  Tenant  and  every  such  person 
agrees  that  in  the  event  of  any  action  of  ejectment  brought  by  the  Landlord,  its 
successors  or  assigns  for  failure  to  perform  any  of  the  covenants  herein,  or  in 
any  renewal  hereof,  the  Tenant  for  the  Tenant  and  every  such  person  waives 
all  right  to  any  second  or  further  trial  as  matter  of  right  or  favor  under  Sec- 
tions 1525  and  1526  of  the  Code  of  Civil  Procedure,  or  any  other  law  of  similar 
import  now  existing  or  which  may  hereafter  be  enacted. 

IT  IS  SPECIFICALLY  UNDERSTOOD  AND  AGREED  BETWEEN  THE 
LANDLORD  AND  TENANT:  THAT 

1st.  All  improvements  made  in,  to  or  upon  said  premises  by  the  said  Tenant 
shall  become  the  property  of  the  Landlord  at  once  when  made: 

2d.  The  Landlord  shall  not  be  liable  for  any  personal  or  property  damage 
caused  by  other  tenants  or  persons  in  said  building,  or  resulting  from  electricity, 
water,  rain,  snow  or  gas,  which  may  leak  or  flow  from  any  part  of  said 
building,  or  from  the  pipes  or  plumbing  works  of  the  same,  or  from  any  other 
place,  nor  for  any  interference  with  light  or  otherwise,  by  neighboring  owners, 
or  caused  by  the  operations  of  the  City  in  the  construction  of  any  public  work; 

3d.  The  Landlord  shall  not  be  responsible  for  any  latent  defect  or  change 
of  condition  in  any  building  now  on  the  premises  or  in  any  building  which  may 
be  put  on  the  premises  during  the  term  of  this  lease  or  any  renewal  hereof, 
nor  be  liable  to  any  person  for  damages  to  any  such  building  nor  for  damage 
to  persons  or  property  by  reason  of  anything  aforesaid;  and  the  rent  shall  not 
be  withheld  or  diminished  on  account  of  any  such  defect  or  change; 

4th.  If  the  Tenant  shall  make  default  in  fulfilling  any  of  the  covenants  and 
conditions  of  this  lease  or  in  making  any  payment  herein  provided,  or  in  case 
the  Tenant  abandons  the  premises  and  the  same  shall  become  vacant,  the 
Landlord  may  re-enter  said  premises  and  remove  all  persons  therefrom,  either 
by  any  suitable  action  or  proceeding  at  law  or  by  force  or  otherwise  without 
being  liable  to  indictment,  prosecution  or  damages  therefor,  and  in  any  such  case 
the  Landlord  may  give  to  the  Tenant  five  days'  notice  of  its  election  to  end 
the  term  under  this  lease,  and  thereupon  the  term  under  this  lease  shall  expire 
and  all  right  of  occupation  thereunder  on  the  part  of  the  Tenant  shall  end,  and 
the  Tenant  will  quit  and  surrender  the  said  premises  to  the  Landlord,  and  at 
the  option  of  the  Landlord,  it  may  relet  the  premises  as  the  agent  of  the 
Tenant  and  receive  the  rents  therefor,  applying  the  same  first  to  the  payment 
of  such  expenses  as  it  may  be  put  to,  and  then  to  the  payment  of  the  rent  and 
other  payments  which  may  be  or  become  due  according  to  the  terms  of  this 
lease,  and  the  balance,  if  any,  at  the  expiration  of  the  term  of  this  lease,  shall 
be  paid  over  to  the  Tenant; 

5th.  IN  CASE  of  re-entry  or  of  termination  of  this  lease  by  summary  pro- 
ceedings, or  otherwise,  whether  the  premises  be  relet  or  not,  the  Tenant  shall 
remain  liable  until  the  time  when  this  lease  would  have  expired  but  for  the 
termination  thereof,  for  the  yearly  rent  and  additional  rent  reserved  herein, 


296   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

less  the  avails  of  reletting, '  if  any  there  be,  and  shall  pay  the  same  monthly, 
or  otherwise,  as  hereinbefore  provided  for  payment  of  rent; 

6th.  The  failure  of  the  Landlord  to  insist  in  any  one  or  more  instances  upon 
strict  performance  of  any  of  the  covenants  or  conditions  of  this  lease,  or  of  any 
renewal  hereof,  or  to  exercise  any  option  herein  conferred,  shall  not  be  con- 
strued as  a  waiver  or  relinquishment  for  the  future  of  any  such  covenant,  con- 
dition or  option,  but  the  same  shall  continue  and  remain  in  full  force  and 
effect. 

7th.  ALL  NOTICES  provided  for  in  this  lease  shall  be  given  in  writing  and 
may  be  given  by  mailing  and  depositing  the  same  in  any  Post  Office  Station  or 
letter-box  enclosed  in  a  post-paid  envelope  addressed  to  the  Tenant  at  the 
demised  premises. 

8th.  This  lease  shall  be  subject  and  subordinate  at  all  times  to  the  lien  of 
the  mortgages  now  on  the  demised  premises  and  subject  and  subordinate  to 
the  lien  of  any  mortgage  or  mortgages  which  at  any  time  may  be  made  a  lien 
on  the  demised  premises,  and  the  Tenant  covenants  that  the  Tenant  and  all 
persons  having  any  interest  in  this  lease  will  execute  proper  subordination 
agreements  to  this  effect  at  any  time  upon  request  of  the  Landlord.  If  the 
Landlord  shall  at  any  time  fail  to  pay  the  interest  or  any  installment  of  prin- 
cipal which  may  become  due  an'd  payable  by  the  terms  of  such  mortgage,  or 
shall  fail  to  pay  the  taxes  and  assessments  charged  against  the  said  premises, 
or  shall  fail  or  neglect  otherwise  to  comply  with  the  terms  of  such  mortgage 
or  mortgages,  and  the  holder  or  holders  of  such  mortgages  shall  have  previ- 
ously demanded  such  payments  or  such  compliance,  the  Tenant  shall  have  the 
right  to  make  payment  of  such  interest,  taxes  or  assessments,  or  any  other  pay- 
ment required  by  the  terms  of  such  mortgage  or  mortgages  and,  to  the  extent 
of  such  payments,  to  be  subrogated  to  the  rights  of  the  holder  of  such  mortgage, 
and  the  Tenant  shall  have  the  right  to  consider  such  payment  as  an  advance 
rental  of  said  premises;  and  if  the  Tenant  shall  not  have  the  use  of  the  said 
premises  for  the  entire  period  for  which  such  advance  rental  shall  have  been 
paid,  the  Landlord  hereby  agrees  to  pay  to  the  said  Tenant  the  entire  amount 
of  such  advances,  less,  however,  such  proportion  thereof  as  may  be  properly 
chargeable  as  rent  for  the  period  of  the  Tenant's  occupancy  of  said  premises. 

THE  LANDLORD  FOR  ITSELF,  ITS  SUCCESSORS  AND  ASSIGNS 
COVENANTS  TO  AND  WITH  THE  TENANT, 

That  if,  and  so  long  as  the  Tenant  pays  the  rent  and  additional  rent  re- 
served under  this  lease  and  observes  the  covenants  thereof,  the  Tenant  shall 
quietly  enjoy  the  demised  premises  and  every  part  thereof,  subject,  however, 
to  the  terms  of  this  lease  and  to  mortgages  as  aforesaid,  which  may  at  any 
time  be  or  become  liens  on  the  demised  premises. 

THE  LANDLORD  AND  TENANT  COVENANT  TO  AND  WITH  EACH 
OTHER  that  this  lease  and  each  and  every  covenant  herein  shall  bind  and 
run  in  favor  of  the  Landlord,  its  successors  and  assigns  and  the  Tenant,  and 
the  executors,  administrators,  successors  and  assigns  of  the  Tenant. 

IN  WITNESS  WHEREOF,  the  Landlord  has  caused  its  corporate  seal  to 
be  hereto  affixed  and  same  to  be  assigned  by  its  proper  officers,  and  the 
Tenant  has  executed  the  same. 

(REALTY  ASSOCIATES, 


By 


(ACKNOWLEDGMENT) 


APPENDIX  297 

No.  70 

AGREEMENT  GUARANTEEING  PAYMENT  OF  RENT 

(TO  BE  ATTACHED  TO  LEASE) 

IN  CONSIDERATION  of  the  letting  of  the  premises  within  mentioned  to 

the  within  named   and  the  sum  of  one  dollar  to  me  paid  by  the  said 

part.,  of  the  first  part do  hereby  covenant.,   and  agree,  to  and  with 

the  part.,  of  the  first  part  above  named,  and legal  representatives,  that 

if  default  shall  at  any  time  be  made  by  the  said    in  the  payment  of 

the  rent  and  performance  of  the  covenants  contained  in  the  within   lease  on 

part  to  be  paid  and  performed,  that  will  well  and  truly  pay  the 

said  rent,  or  any  arrears  thereof,  that  may  remain  due  unto  the  said  part., 
of  the  first  part,  and  also  all  damages  that  may  arise  in  consequence  of  the  non- 
performance  of  said  covenants,  or  either  of  them,  without  requiring  notice  of 
any  such  default  from  the  said  part. .  of  the  first  part. 

WITNESS  hand  and  seal  this day  of in  the  year  one 

thousand  nine  hundred  and  

WITNESS, 


No.  71 

SCHEDULE  OF  COMMISSIONS  AND  CHARGES 

REGULATIONS  AS  TO  REAL  ESTATE  COMMISSIONS 
AS  ADOPTED  BY 

THE  REAL  ESTATE  BOARD  OF  NEW  YORK 

The  following  schedule  of  commissions  has  been  approved  by  the  Real  Estate 
Board  of  New  York,  viz.: 

PRIVATE  SALES 

The  commissions  for  the  sale  or  exchange  of  real  estate  in  the  Boroughs  of 
Manhattan  and  the  Bronx,  2l/2%  of  the  selling  price  up  to  $40,000  and  1%  of 
the  excess  of  the  selling  price  above  $40,000. 

For  selling  acreage  within  the  limits  of  the  Borough  of  the  Bronx 5% 

For  selling  improved  property  in  the  Borough  of  Richmond 2^2% 

For  selling  lots  and  acreage  in  the  Borough  of  Richmond 5% 

For  selling  leaseholds  within   the    limits  of  the  Borough   of  Manhattan 

and  the  Bronx,  on  the  assessed  value  of  the  land  and  improvements       1% 
For  selling  leases  in  Manhattan  and  the  Bronx,  on  the  sum  of  the  con- 
sideration to  be  paid  for  the  lease 1% 

Plus  a  commission  where  the   lease  is  for  2l/2  years  or  longer  on  the 

aggregate  rental  of  $200,000  or  less 1H% 

On    aggregate    gross    rental    over    $200,000,    ll/2%    will    govern    up    to 

$200,000  and  1%  additional  on  the  amount  above  $200,000. 
For  selling  furniture   and   fixtures 10% 

WATER  FRONT 

For  selling  water  front  properties  of  New  York  Harbor 5% 


298    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

SPECIAL  RULES 

For  exchanging  real  estate  a  commission  shall  be  paid  on  all  properties  men- 
tioned in  the  contract  by  the  respective  sellers  thereto. 

No  commission  of  less  than  $100  shall  be  charged  in  making  a  sale  of  property. 

Should  the  title  of  property  prove  to  be  imperfect,  whereby  a  sale  cannot  be 
consummated,  the  claim  for  commission  shall  not  be  invalidated  thereby. 

Brokerage  shall  be  due  and  payable  when  the  price  and  terms  are  arranged 
between  buyer  and  seller. 

MORTGAGES 

For  procuring  the  acceptance  of  first  mortgage  loan  applications  (except 

by  agreement)    1% 

LEASING 

Leasing  for  a  term  of  one  year  or  under  on  an  amount  equal  to  one  year's 
rental    

Leases  for  a  period  of  more  than  one  year  and  less  than  2/^2  years  on  the 

average  of  full  year  rentals 

Fractional  parts  of  a  year  are  not  to  be  considered. 

Leasing  for  term  of  2^2  years  or  longer  on  aggregate  gross  rental  of 

$200,000  or  less,  on  aggregate  gross  rental 

On  transactions  involving  an  aggregate  gross  rental  of  over  $200,- 
000  the  ll/2%  rate  will  govern  up  to  $200,000  and  1%  additional 
on  the  amount  of  the  gross  rental  in  excess  of  $200,000. 

Leasing  private  dwellings  or  apartments  furnished  for   a  term  of  one 

year  or  under  on  the  total  rent  to  be  paid 5% 

There  shall  be  no  additional  charge  for  leases  under  2*/2  years. 

Leasing  private  dwellings  or  apartments  furnished  for  2%  years  or  more, 

on  the  total  amount  of  rent  paid 2% 

Leasing  Water  Front  Property  of  New  York  Harbor  on  the  gross  amount 

of  the   rental S% 

Leasing  country  property  first  year S% 

Leasing  each  subsequent  year  to  same  party 


No.  72 

SCHEDULE  OF  REAL  ESTATE  COMMISSIONS 

Adopted  1905,  Amended  Jan.  8,  1918,  and  April  12,  1921,  by  the 

BROOKLYN  REAL  ESTATE  BOARD 

189  Montague  St.,  Brooklyn 


This  schedule  card  is  issued  by  the 

BROOKLYN  REAL  ESTATE  BOARD 

for  the  use  of  its  members 


PRIVATE  SALES 
City  property  (limits  of  Brooklyn)  on  price  obtained 

County  (suburban)   property,  on  price  obtained 5% 

Water  front  property,  on  price  obtained 5% 

For  selling  leases,  on  the  sum  of  the  consideration  to  be  paid  for  the  lease       1% 
"Plus  the  usual  renting  commission  on  the  balance  of  the  term  of  the 

lease  as  provided  for  elsewhere  in  this  schedule." 

Good  Will,  Goods  and  Chattels 10% 

(Minimum  sale  commission  $100.) 


APPENDIX  299 

RENTALS 

One  year  or  less,  on  annual  rent 3% 

More  than  one  year,  on  the  first  year's  annual  rent 3% 

Additional  year,  on  the  second  year's  annual  rent "2>l/2% 

Additional  year,  on  the  third  year's  annual  rent 2l/2% 

Each  additional  year  thereafter,  on  annual  rent 1% 

Furnished  houses  or  apartments,  for  the  term S% 

Country  property,  one  year  or  less,  on  annual  rent S% 

More  than  one  year,  on  the  first  year's  annual  rent S% 

Each  additional  year,  on  annual  rent 2l/2% 

Water  front  property,  on  annual  rent  for  the  term 5% 

Renewals,  Sub-rentals  and  Assignments  shall  be  computed  on  the  same  basis 

as  original  lease. 

MANAGEMENT 

On  the  amount  of  gross  rent 5% 

Such   service   if  discontinued   on   notice   by  client,   agent  shall   be   entitled   to 

regular  renting  commission  for  the  unexpired  term  of  the  rentals  arranged 

during  such  service. 

MORTGAGE  LOANS 

On    first    mortgage \% 

Building   Loans    2% 

Country  Loans  2l/2% 

(Minimum  mortgage  loan  commission,  $50.) 

APPRAISALS 

Lots  20  x  100  feet  or  less,  plot  1  to  3  lots $15 

Each  additional  lot  or  fraction  thereof,  up  to  10  lots 5 

Private  dwelling  houses,  20  x  100  feet  or  less 15 

Each  additional  lot  or  fraction  thereof 5 

Tenements  and  Stores  20  x  100  feet  or  less 20 

Each  additional  lot  or  fraction  thereof 10 

Loft  buildings,  factories,  garages,  stables,  20x100  feet  or  less 25 

Each  additional  lot  or  fraction  thereof 10 

Elevator  apartments  50  x  100  feet  or  less 50 

Each  additional  lot  or  fraction  thereof 10 

Office  buildings,  waterfronts,  hotels,  acreage,  country  residences  and  other  prop- 
erty, not  specified,  rates  by  special  arrangement. 

Expert  testimony  and  cross-examination,  by  special  arrangement. 


No.  73 

SCHEDULE  OF  COMMISSIONS  AND  CHARGES— 
Cook  County  Real  Estate  Board 

ARTICLE  1.— COMMISSIONS  AND  CHARGES 

SECTION  1.  For  negotiating  leases  for  business  and  residence  property  where 
rents  are  not  collected  by  the  agent,  and  where  buildings  are  already  erected, 
but  not  including  ground  leases. 

Where  Term  is  Six  Months  or  less: 

Rule  I.  Where  the  term  of  lease  is  six  (6)  months  or  less,  charge  seven  per 
cent  (7%)  on  an  amount  equal  to  six  (6)  months'  rental.  (See  Rule  3.) 

Where  Term  is  more  than  Six  Months  and  does  not  exceed  One  Year: 

Rule  2.  Where  the  term  is  more  than  six   (6)    months  and  does  not  exceed 


300    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

one  (1)  year,  charge  six  per  cent  (6%)  on  an  amount  equal  to  one  (1)  year's 
rental.  (See  Rule  3.) 

If  Monthly  Rentals  are  not  Uniform: 

Rule  J.  If  the  monthly  rentals  are  not  uniform  throughout  the  entire  term 
of  any  lease  coming  under  the  provisions  of  Rules  1  and  2,  the  average  monthly 
rental  for  the  actual  period  of  the  lease  shall  be  used  as  the  basis  for 
computation. 

Where  Terms  exceed  One  Year: 

Rule  4.  Where  a  term  exceeds  one  (1)  year,  use  as  a  basis  charge,  six  per 
cent  (6%)  and  add  for  each  six  (6)  months  or  fraction  thereof  over  one  (1) 
year,  one-half  (^)  of  one  per  cent  (1%),  which  rate  shall  be  figured  on  one 
(1)  average  year's  rental  of  the  entire  term. 

What  to  Charge  if  Lease  calls  for  a  Net  Rental: 

Rule  $.  In  figuring  commissions  to  be  charged  on  leases  where  the  rental  to 
be  received  by  the  Lessor  is  net,  that  is  to  say,  where  the  Lessee  agrees  to  pay 
taxes  and  fire  insurance  premiums,  in  addition  to  the  rental  named  in  the  lease, 
charge  two  per  cent  (2%)  of  the  term  rental. 

When  Lease  contains  Privilege  of  Renewal: 

Rule  6.  When  the  lease  gives  the  Lessee  a  privilege  of  renewal,  the 
charge  shall  be  made  for  the  actual  term  of  the  lease.  If  the  Lessee  later 
avails  himself  of  the  privilege  of  renewal,  whether  strictly  according  to  the 
terms  expressed  in  the  lease  or  not,  the  agent  shall  also  be  entitled  to  a  com- 
mission on  the  extended  period.  This  additional  commission  shall  be  the  dif- 
ference between  the  amount  of  commission  due  for  the  entire  term,  including 
the  extended  period  and  the  amount  of  commission  previously  paid.  The  addi- 
tional commission  shall  be  paid  the  agent  at  the  time  of  renewal. 

Where  Renewal  of  Lease  is  Negotiated  by  Agent: 

Rule  7.  Where  renewals  of  leases  are  negotiated  and  the  agent  does  not 
collect  the  rent,  he  shall  charge  the  regular  rates  prescribed  in  this  Section, 
the  same  as  if  the  leases  were  negotiated  with  new  tenants. 

Minimum  Charge  of  Leasing  Residence  Property: 

Rule  8.  The  minimum  charge  to  be  made  in  any  case  for  leasing  residence 
property  shall  be  Ten  Dollars  ($10). 

Where  the  Lease  contains  Option  to  Purchase: 

Rule  9.  Should  there  be  a  clause  in  the  lease  giving  the  Lessee  an  option  to 
purchase  the  property  demised,  whether  or  not  the  purchase  is  made  exactly 
on  the  terms  stipulated  in  the  lease,  the  owner  shall  pay  the  agent  who  nego- 
tiated the  lease,  three  per  cent  (3%)  on  the  purchase  price,  to  be  paid  when 
the  sale  is  closed,  after  deducting  from  the  said  commission  on  the  sale  the 
unexpired  commission  already  paid,  for  the  negotiation  of  the  lease.  (See 
Rule  35,  Sec.  5.) 

SECTION  2. — Charges  for  negotiating  leases  which  contemplate  the  erection 
of  new  buildings. 

Where  Lease  contemplates  Erection  of  New  Building: 

Rule  10.  The  charge  for  negotiating  leases  which  contemplate  the  erection 
of  a  building  for  a  tenant,  shall  be  three  per  cent  (3%)  on  the  value  of  the 
land  as  calculated  in  the  making  of  the  lease,  and  three  per  cent  (3%)  on  the 
cost  of  the  proposed  building  and  appurtenances. 

Charges  for  procuring  tenants  under  the  conditions  mentioned  in  the  forego- 
ing Sections  1  and  2  are  to  be  made  at  the  rates  stipulated,  unless  there  shall 
have  been  a  previous  agreement  between  the  owner  and  the  agent  for  the 
collection  of  rent. 

SECTION  3. — Charges  for  management  of  property  where  agent  collects  the 
rent,  makes  leases,  repairs,  etc. 

Charges  for  Store,  Loft,  Office,  Residence  or  Other  Property: 


APPENDIX  301 

Rule  II.  The  regular  rate  of  commission  for  renting  and  collection  of  rents 
shall  be  six  per  cent  (6%). 

Charges  on  Disbursements: 

Rule  12.  In  the  management  of  property  under  this  section  the  agent  shall 
be  entitled  to  charge  on  disbursements  as  follows,  to-wit:  On  amounts  paid 
out  for  taxes  on  improved  property  one  per  cent  (1%),  and  on  unimproved 
property  two  and  one-half  per  cent  (2^2%),  no  charge  to  be  less  than  One 
Dollar  ($1).  Members  shall  have  the  right  to  charge  for  special  services  not 
contemplated  under  ordinary  agency. 

Rule  13.  For  negotiating  new  leases  and  for  the  renewals  of  old  leases  the 
charge  shall  be  in  accordance  with  the  circumstances  and  services  performed, 
and  shall  be  in  addition  to  the  amount  expended  for  advertising. 

When  Collection  of  Rents  is  Withdrawn: 

Rule  14.  Where  the  collection  of  rents  on  property  is  withdrawn  from  an 
agent,  such  agent  shall  be  entitled  to  charge  for  unexpired  term  of  any  leases 
he  may  have  made  or  renewed  during  his  agency,  at  the  rates  specified  in 
Section  1  of  Article  1  hereof. 

Agents  may  take  Management  on  Other  Basis: 

Rule  15.  Agents  may  take  the  management  of  buildings  and  charge  the 
regular  Board  Rate  for  making  new  leases  as  prescribed  in  Sections  1  and  2 
hereof,  and  in  their  discretion  reduce  the  charge  hereinbefore  provided  in  this 
section  for  renting  and  collecting.  This  policy  is  recommended  to  members  for 
the  reason  that  it  places  them  in  position  to  pay  commissions  to  other  brokers, 
who  may  assist  them  in  making  leases. 

For  the  Transfer  or  Assignment  of  Leases: 

Rule  16.  For  transferring  or  assigning  leases  the  charge  shall  be  in  propor- 
tion to  the  service  rendered,  but  in  no  event  shall  same  be  less  than  Five  Dollars 
($5)  for  leases  on  residence  property  and  Fifteen  Dollars  ($15)  for  leases  on 
business  property. 

SECTION  4.  Ground  Leases. — The  following  charges  shall  be  made  for  ground 
leases  whether  the  agent  is  managing  and  collecting  rents  on  the  property  at 
the  time  of  making  lease  or  not. 

Where  the  Term  is  5  Years  or  less: 

Rule  17.  For  making  an  original  lease,  or  a  sub-lease  thereof,  where  the  term 
of  lease  is  five  (5)  years  or  less,  charge  in  accordance  with  Section  1  of  this 
article. 

Where  the  Term  is  over  5  and  does  not  exceed  15  Years: 

Rule  18.  For  making  an  original  lease,  or  sub-lease  thereof,  where  the  term 
of  lease  is  over  five  (5)  years  and  does  not  exceed  fifteen  (15)  years,  charge  on 
the  total  rent  for  the  term,  2  per  cent  (2%). 

Where  the  Term  exceeds  15  Years: 

Rule  IQ.  For  making  an  original  lease,  or  a  sub-lease  thereof,  where  the 
term  of  lease  exceeds  fifteen  (15)  years,  charge  on  the  value  of  the  ground  as 
determined  by  capitalizing  the  annual  ground  rent  on  a  four  per  cent  (4%) 
basis,  three  per  cent  (3%)  commission. 

If  Annual  Ground  Rent  is  not  Uniform: 

Provision  (A}  of  Rule  19.  If  the  annual  ground  rental  during  the  entire  term 
of  the  lease  is  not  uniform,  the  charge  shall  be  made  on  the  value  of  the  land 
as  determined  by  the  average  annual  ground  rental  capitalized  as  aforesaid. 
If  Lease  contains  Provision  for  Reappraisement: 

Provision  (B)  of  Rule  19.  If  the  lease  contains  a  clause  providing  for  reap- 
praisement  of  the  ground  by  appraisers  during  the  term  of  the  lease,  the  average 
annual  rental  between  the  date  of  lease  and  the  date  set  for  the  first  appraise- 
ment shall  be  taken  as  the  basis  on  which  to  compute  the  total  rental  for  the 
entire  term. 


302    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

If  Other  Consideration  is  Paid  by  Lessee  in  Addition  to  Rent: 

Rule  20.  In  any  case  if  cash  or  other  consideration  is  paid  in  addition  to  the 
ground  rent,  the  amount  of  such  cash,  or  value  of  such  consideration,  shall  be 
added  to  and  become  a  part  of  the  capitalized  value  on  which  the  charge  shall 
be  figured. 

SECTION  5. — Charges  for  Making  Sales  of  Real  Estate: 

Rule  21.  On  a  sale  of  $1,500  or  less  6%,  but  no  charge  shall  be  less  than 
$25.00. 

Rule  22. 

On  a  sale  of  over  $1,500  up  to  and  including  $2,000 $100.00 

On  a  sale  of  over  $2,000  up  to  and  including  $2,500 125.00 

Rule  23. 

On  a  sale  of  over  $2,500  up  to  and  including  $3,000 150.00 

On  a  sale  of  over  $3,000  up  to  and  including  $3,500 175.00 

On  a  sale  of  over  $3,500  up  to  and  including  $4,000 200.00 

Rule  24. 
On  a  sale  of  over  $4,000  up  to  and  including  $5,000 220.00 

Rule  25. 
On  a  sale  of  over  $5,000  up  to  and  including  $6,000 230.00 

Rule  26. 
On  a  sale  of  over  $6,000  up  to  and  including  $7,000 240.00 

Rule  27. 
On  a  sale  of  over  $7,000  up  to  and  including  $8,000 250.00 

Rule  28. 
On  a  sale  of  over  $8,000  up  to  and  including  $9,000 265.00 

Rule  2p. 
On  a  sale  of  over  $9,000  up  to  and  including  $10,000 300.00 

Rule  30. 
On  a  sale  of  over  $10,000  three  per  cent  (3%). 

Rule  31.  Commission  on  sales  of  industrial  property,  five  per  cent  (5%). 

The  above  schedule  does  not  apply  to  the  handling  of  subdivisions  where  the 
charge  shall  be  a  matter  of  contract. 

Selling  Acre  and  Farm  Property: 

Rule  32.  In  selling  or  exchanging  acre  property,  the  charge  shall  be  not  less 
than  five  per  cent  (5%). 

Selling  Leaseholds: 

Rule  33.  For  selling  leaseholds  of  buildings,  or  parts  thereof,  charge  for  the 
unexpired  term  of  the  lease  the  same  rates  as  are  provided  in  Section  1  of 
Article  1,  as  if  a  new  lease  were  made,  plus  twenty  per  cent  (20%)  of  the 
bonus.  For  selling  Ground  Leases  and  Improvements,  charge  4  per  cent  on 
the  amount  of  the  sale  price  of  the  leasehold  interest  and  improvements,  plus 
\l/2%  on  the  value  of  the  ground  as  determined  by  capitalizing  on  a  4  per  cent 
basis  the  annual  ground  rental  being  paid  at  the  time  of  sale. 

Exchanges : 

Rule  34.  In  case  of  exchange  of  property,  a  full  commission,  based  upon  the 
sale  price,  shall  be  paid  by  each  party,  the  same  as  if  a  sale  of  each  property 
had  been  made. 

What  Shall  Constitute: 

Rule  35.  All  charges  herein  provided  for  the  sale  or  exchange  of  real  estate 
and  the  sale  of  leaseholds  and  buildings,  shall  be  based  upon  the  sale  price, 
meaning  thereby  that  if  the  sale  is  made  subject  to  a  mortgage  or  mortgages, 
the  sale  price  shall  be  construed  to  mean  the  price  of  the  equity,  plus  the 
encumbrances. 

SECTION  6. — Charges  for  Making  Loans: 

Rule  36.  On  Loans  on  improved  property,  other  than  Bond  issues,  the  mort- 


APPENDIX  303 

gagor  shall  pay  not  less  than  3^2%  on  the  amount  of  the  loan,  and  in  addition 
thereto  Recorder's  fees  for  recording  the  necessary  documents,  the  cost  of  con- 
tinuation of  the  Abstract  Title  brought  down  to  include  the  record  of  Deed 
securing  the  loan,  the  attorney's  fees  for  the  examination  of  the  Title  or  Title 
Guaranty  Policy  in  lieu  thereof;  or  expenses  involved  in  the  registration  of 
property  under  the  Torrens  System  including  filing  fees  at  Registrar's  office; 
the  minimum  commission  to  be  $25. 

Rule  37.  On  loans  on  improved  property,  6%  on  amount  of  loan ;  minimum 
commission  to  be  $25. 

Rule  38.  On  bond  issues  the  mortgagor  shall  pay  the  person  or  firm  financing 
same  not  less  than  1/4%  per  annum  for  the  term  of  the  loan  on  the  amount 
of  the  bond  issues,  and  in  addition  thereto  all  other  charges  specified  in  the 
preceding  paragraphs  of  this  section,  including  the  cost  of  printing  and  certify- 
ing the  bond  issue. 

Rule  39.  For  renewal  of  loans  the  mortgagor  shall  pay  at  the  same  rate  of 
commission  as  provided  in  the  preceding  paragraphs  of  this  section. 

SECTION  7. — Fees  for  Valuations: 

For  making  valuations  on  real  estate,  the  Valuation  Committee  shall  not 
charge  less  than  the  following  amounts: 

On  amounts  not  exceeding  $10,000,  charge  $25. 

On  amounts  over  $10,000  and  not  exceeding  $30,000,  charge  $25  on  the  first 
$10,000  and  $2  per  thousand  or  major  fraction  thereof  on  excess  up  to  and 
including  $30,000. 

On  all  amounts  over  $30,000  and  not  exceeding  $200,000,  charge  $1  per 
thousand  or  major  fraction  thereof  on  excess  over  $30,000,  with  a  further 
charge  of  75  cents  per  thousand  or  major  fraction  thereof  on  amounts  over 
$200,000. 

IN  VALUING  LEASEHOLDS,  fees  or  undivided  interest,  the  charges  shall 
be  based  on  the  value  of  the  entire  property  of  which  the  leasehold,  fee  or 
undivided  interest  forms  a  part 


No.  74 

BOSTON  REAL  ESTATE  EXCHANGE 

INCORPORATED  1889 
BOSTON,  MASSACHUSETTS 

SCHEDULE  OF  BROKER'S  COMMISSIONS 

(In  the  absence  of  special  agreement.)     Adopted  by  the  Board  of  Directors, 
February  27,  1920.    In  effect  April  1,  1920. 

BOSTON  PROPER 

(as  defined  below) 

SALES  Minimum 

2l/2%  up  to  $40,000  and  1%  on  the  balance $100 

Vacant  land  west  of  Massachusetts  Ave.  and  vacant  land  in  that  part 

of  South  Boston  included  in  "Boston  Proper,"  3% 100 

EXCHANGES 

Commissions  as  above  paid  by  both  parties. 
MORTGAGES 

2%  up  to  $10,000  and  1%  on  the  balance $25 

Second  Mortgages,  2  % 25 

Construction   Mortgages,  2% 25 


304   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

LEASES 
BUSINESS  PREMISES,  3%  on  rent  for  a  year  and  1%  on  rent  for  balance 

of  term $25 

Less  than  one  year  or  tenant-at-will 

Over  $50  a  month,  35%  of  a  month's  rent 25 

At  $50  a  month  or  less,  50%  of  a  month's  rent 10 

RESIDENCES  AND  APARTMENTS,  4%  on  rent  for  a  year  (or  a  season)  and 

1%  on  rent  for  balance  of  term 25 

Tenant-at-will,  same  as  Business  Premises. 

MANAGEMENT 
ON  AMOUNTS  COLLECTED  BY  AGENT 

Tenements  and  Apartment  Houses 6% 

Other   Properties   5% 

ON  COST  OF  IMPROVEMENTS  SUPERVISED  BY  AGENT 5% 

"Boston  Proper"  extends  to  the  southerly  lines  of  estates  abutting  on  the 
southerly  side  of  Massachusetts  Avenue  from  the  Roxbury  Canal  to  the  N.  Y., 
N.  H.  &  H.  railroad  location,  and  then  to  the  centre  line  of  Ruggles  Street  and 
the  Fenway  from  said  railroad  location  to  Brookline  Avenue,  and  across  the 
Riverway  to  the  centre  line  of  St.  Mary's  and  Ashby  Streets  to  the  Charles 
River,  and  includes  also  that  part  of  South  Boston  bounded  by  Boston  Harbor, 
the  Reserved  Channel,  E  Street,  West  1st  Street,  Dorchester  Avenue  and  Fort 
Point  Channel. 

SUBURBS 

(as  defined  below) 

SALES  Minimum 

IMPROVED  PROPERTY,  3^%  "P  to  $15,000  and  2l/2%  on  next  $185,000 

and  1%  on  the  balance $100 

UNIMPROVED  PROPERTY,  5%  up  to  $50,000  and  2^2%  on  next  $150,000 

and  1%  on  the  balance 25 

FARMS,  6%  up  to  $10,000  and  5%  on  the  balance 200 

FACTORY  PROPERTY,  6% 200 

EXCHANGES.    Commissions  as  above  paid  by  both  parties. 
MORTGAGES 

2%  up  to  $100,000  and  1%  on  the  balance $25 

Second  Mortgages,  2% 25 

Construction  Mortgages,  2% 25 

LEASES 
BUSINESS  PREMISES,  4%  on  rent  for  a  year  and  1%  on  rent  for  balance 

of  term $25 

Less  than  one  year  or  tenant-at-will 

Over  $30  a  month,  45%  of  a  month's  rent 15 

At  $30  a  month  or  less,  50%  of  a  month's  rent 10 

RESIDENCES  AND  APARTMENTS,  5%  on  rent  for  a  year  (or  a  season)  and 

1%  on  rent  for  balance  of  term 15 

Tenant-at-will,  same  as  Business  Premises. 
ENTIRE  FACTORY  PROPERTY,  ALSO  LAND  AND  WHARVES,  5%  on  rent  for  a 

year  and  2l/2%  on  rent  for  balance  of  term 25 

MANAGEMENT 
ON  AMOUNTS  COLLECTED  BY  AGENT  \ 

Tenements  and  Apartment  Houses 6% 

Other  Properties    5% 

Monthly  rents  under  $15  and  weekly  rents 10% 

ON  COST  OF  REPAIRS  AND  IMPROVEMENTS  SUPERVISED  BY  AGENT 5% 


APPENDIX  305 

"Suburbs"  include  all  districts  of  Boston  outside  "Boston  Proper,"  and  the 
following:  Arlington,  Belmont,  Brookline,  Cambridge,  Chelsea,  Dedham, 
Everett,  Maiden,  Medford,  Melrose,  Milton,  Newton,  Quincy,  Revere,  Soraer- 
vilte,  Walthara,  Watertown,  Winchester  and  Winthrop. 

OUTSIDE  OF  SUBURBS 
SALES  Minimum 

6%  up  to  $10,000  and  5%  on  the  balance $200 

North  Shore,  5%  up  to  $25,000  and  2T/2%  on  the  balance 100 

South  Shore,  5% 100 

Factory  Property,   6% 200 

EXCHANGES.     Commissions  as  above  paid  by  both  parties. 
MORTGAGES 

3%  up  to  $20,000  and  2%  on  next  $80,000  and  1%  on  the  balance $25 

LEASES 

5%  on  rent  for  a  year  (or  a  season)  and  2l/t%  on  rent  for  balance  of 

term    $25 

Tenant-at-will 

Over  $30  a  month,  45%  of  a  month's  rent 15 

At  $30  a  month  or  less,  50%  of  a  month's  rent 10 

TAXES  PAID  BY  LESSEES 

Taxes  on  leased  premises  to  be  paid  by  Lessees  shall  be  treated  as  part 
of  the  rent  on  which  broker's  commissions  are  chargeable,  using  the  taxes 
for  the  current  year  when  ascertainable,  otherwise  those  for  the  previous 
year,  as  a  basis.  In  case  of  leased  premises  not  previously  assessed,  the 
taxes  may  be  estimated  or  the  assessment  thereof  awaited. 
LONG  TERM  LEASES 

On  a  lease  for  a  term  of  more  than  21  years,  the  commission  shall  be  com- 
puted on  the  first  21  years  of  the  term  only. 
SALES  OPTIONS  IN  LEASES 

In  case  of  a  lease  containing  an  option  to  purchase,  the  broker  is  entitled 
in  any  event  to  a  commission,  as  herein  provided,  for  negotiating  the  lease. 
If  the  option  to  purchase  is  exercised,  the  broker  is  then  entitled  to  receive 
from  the  original  lessor  an  additional  commission,  if  any  be  necessary,  to 
make  the  total  commissions  equal  a  commission  on  the  sale  plus  a  commis- 
sion on  the  lease  up  to  the  time  of  the  transfer  of  title. 

RENEWALS  OF  LEASES 

When  a  broker  is  employed  to  renew  a  lease,  he  is  entitled  to  a  full  com- 
mission if  the  lease  is  renewed  with  an  increase  of  rent,  or  to  a  half  com- 
mission if  renewed  without  increase  of  rent. 

EXTENSIONS  OF  LEASES 

When  a  right  to  extend  a  lease,  as  provided  therein,  is  exercised,  the  broker 
who  negotiated  the  lease  is  entitled  to  receive  from  the  original  lessor  a 
commission  on  such  extension ;  but  the  total  commissions  on  lease  and  ex- 
tensions shall  not  exceed  the  amount  chargeable  for  both  considered  as  one 
term. 

SALE  OF  LEASE,  GOOD-WILL  OR  PERSONAL  PROPERTY 

The  broker  is  entitled  to  a  commission  of  5%  of  the  amount  paid  therefor, 
in  addition  to  a  regular  commission  on  the  lease. 

PAYMENTS  FOR  OPTIONS 

In  case  of  options  not  availed  of,  the  broker  is  entitled  to  receive  one-half 
of  the  amount  paid  for  the  option,  or  one-half  of  a  regular  commission  on 
the  proposed  transaction,  whichever  is  the  lessor. 


306    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  75 

SCHEDULE  OF  COMMISSIONS  AND  CHARGES 
Adopted  by  the  Philadelphia  Real  Estate  Board 

In  the  absence  of  any  contract  to  the  contrary,  the  following  rates  of  com- 
mission shall  obtain,  based  on  the  total  consideration,  including  all  encum- 
brances thereon ;  irredeemable  ground  rents  to  be  capitalized  at  6%. 

PURCHASES  AND  SALES 
CITY 

1.  For  buying  or  selling  improved  real  estate  in  the  City  of  Philadelphia  2l/2% 
Except : 

(a)  Hotels,    office    buildings,    clubs,    moving    picture    halls,    garages, 
stables,  theatres,  schools,  institutional  property,  churches,  saloons, 
apartment  houses  or  flats,  factories,  warehouses,  mills,   industrial, 
sites,  railroad  and  waterfront  or  wharf  properties,  and  all  indus- 
trial and  other  specialty  property,  on  each  of  which  the  charge 
shall  be   5% 

(b)  Ground  or  farms  situate  in  Philadelphia 5% 

FOR  THE  DISTRICTS  OF  GERMANTOWN,  MOUNT  AIRY,  CHESTNUT 

HILL,  OAK  LANE,  OVERBROOK,  FRANKFORD,  ROXBOROUGH 

AND  OTHER  SEMI-SUBURBAN  LOCATIONS 

2.  For  buying  or  selling  improved  real  estate 3% 

Except: 

(a)  Hotels,    office    buildings,    clubs,    moving    picture    halls,    garages, 
stables,  theatres,  schools,  institutional  property,  churches,  saloons, 
apartment  houses  or  flats,  factories,  warehouses,  mills,  industrial 
sites,  railroad  and  waterfront  or  wharf  properties,  and  all  indus- 
trial  and  other  specialty  property,  on  each  of  which  the  charge 
shall  be   5% 

(b)  Ground  or  farms 5% 

SUBURBAN 
(Montgomery  and  Delaware  Counties) 

3.  For  buying  or  selling  improved  real  estate 4% 

Except: 

(a)  Hotels,    office    buildings,    clubs,    moving    picture    halls,    garages, 
stables,  theatres,  schools,  institutional  property,  churches,  saloons, 
apartment  houses  or  flats,  factories,  warehouses,  mills,  industrial 
sites,  railroad  and  waterfront  or  wharf  properties,  and  all  indus- 
trial  and  other  specialty  property,  on  each  of  which  the   charge 
shall  be   5% 

(b)  Farms  and  suburban  ground S% 

In  all  other  adjacent  counties  the  charge  for  all  classes  of  property 

shall  be   S% 

RULES  FOR  SELLING  AND  PURCHASING— CITY  AND  SUBURBAN 

4.  For  selling  real  estate  at  auction  the  commission  to  be  charged   shall  be 
the  same  as  at  private  sale,  and,  in  addition  thereto,  the  owners  shall  pay  for 
all  advertising. 


APPENDIX  307 

5.  The  minimum  commission  of  any  sale  or  purchase  shall  be  $50. 

6.  In  case  of  exchange  of  property  a  commission  as  per  rates  given  herein 
shall  be  paid  by  each  party,  based  on  the  valuations  agreed  upon  by  the  parties 
at  the  time  of  signing  the  agreement. 

7.  Owner  to  pay  for  all   special  advertising  in  connection  with  selling,  ex- 
changing or  renting  of  property. 

8.  For  services  rendered  in  addition  to  negotiating  sale,  such  as  attending  to 
clearing  objections   from  settlement  certificate,    arranging   for   settlement,    and 
such  other  details  as  are  necessary  to  complete  the  settlement,  the  broker  shall 
be  entitled  to  compensation,  the  same  to  be  regulatd  by  the  services  rendered, 
but  the  minimum  charge  to  be  not  less  than  $5.00. 

9.  The  commission  has  been  earned  by  the  agent,  and  is  due  and  payable 
when  the  agent  secures  a  purchaser  who  is  accepted  by  the  seller,  or  secures  a 
purchaser  upon  the  terms  authorized  by  the  seller.     When  agent  acts  for  pur- 
chaser the  same  rules  are  to  apply. 

LEASING 

WHEN  RENTS  ARE  COLLECTED  BY  THE  AGENT 

10.  For  negotiating  leases  when  the  agent  collects  the  rent,  the  commission 
on  all  classes  of  property  shall  be  5%  on  the  amount  of  rent  collected. 

WHEN  RENTS  ARE   NOT  COLLECTED  BY  THE  AGENT 

11.  Stores   and  Dwellings.     For    negotiating   leases    for    store    property    and 
residence  property  and  where  buildings  are  already  erected,  or  where  buildings 
are  to  be  erected  for  the  use  of  lessee.     If  for  term  of  one  year  or  less,  3%  on 
the  annual  rental;  if  in  excess  of  one  year,  3%  on  the  rental  of  the  first  year, 
and  1%  on  the  rental  of  each  additional  year. 

12.  Specialty  Buildings  and  Ground.     For  negotiating  leases  for  office  space 
apartments  or  flats,  for  floor  space  in  lofts  and  manufacturing  buildings,  indus- 
trial sites,  warehouses,  factories,  mills,  garages,  stables,  moving  picture  halls, 
saloons,  waterfront  and  wharf  properties,  farms,  or  vacant  ground,  and  all  in- 
dustrial and  other  specialty  property,  if  for  the  term  of  one  year  or  less,  the 
charge  shall  be  5%  on  the  gross  annual  rental.     If  in  excess  of  one  year,  the 
charge  shall  be  5%  on  the  gross  amount  due  for  the  first  year's  rent  and  2% 
additional  on  the  gross  rental  for  each  succeeding  year. 

13.  Furnished  Divellings,  tie.     For  leasing  furnished  dwellings  and  furnished 
or  unfurnished  apartments  in  the  City  of  Philadelphia  (lessor  to  furnish  inven- 
tory if  required),  charge   shall  be   5%  on  the  total   rental  with  a  minimum 
charge  of  $25.00. 

FOR   THE   DISTRICTS    OF    GERMANTOWN,    MOUNT    AIRY,    CHEST- 
NUT   HILL,    OAK    LANE,    OVERBROOK,    FRANKFORD,    ROX- 
BOROUGH  AND  OTHER  SEMI-SUBURBAN  LOCATIONS 

Same  as  above  for  negotiation  of  leases  for  one  month  or  less.     For  leases 
for  more  than  one  month  rates  are  same  as  suburban. 

14.  Surban.     For   negotiating  leases   on   suburban  property,   either   furnished 
or  unfurnished,  or  vacant  ground   and  farms,  if  for  the  term  of  one  year  or 
less,  the  charge  shall  be  5%  on  the  total  year's  rent. 

15.  If  for  a   term  in   excess   of  one  year,   the   charge   shall   be    an    amount 
equal  to  5%  of  the  first  year's  rent,  plus  3%  of  the  second  year's  rent,  plus  2% 
of  the  third  year's  rent,  plus  1%  on  annual  rent  of  each  succeeding  year. 


308    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

RULES  FOR  LEASING— CITY  AND  SUBURBAN 

16.  When  the  lease  gives  the  lessee  an  option  of  renewal,  the  charge  shall 
be  made  for  the  actual  term  of  the  lease.     If  the  lessee  later  avails  himself 
of  the  privilege  of  renewal,  whether  strictly  according  to  the  terms  expressed 
in  the   lease  or  not,  the  agent  shall  also  be  entitled  to  a  commission  on  the 
extended  period.     This  additional  commission  shall   be  the  difference  between 
the  amount  of  commission  due  for  the  entire  term,  including  the  extended  period, 
and  the   amount  of  commission   previously   paid.     The   additional   commission 
shall  be  paid  the  agent  at  the  time  of  renewal. 

17.  Where  renewals  of  leases  are  negotiated  by  the  agent,  and  the  agent  does 
not  collect  the  rent,  he  shall  charge  the  regular  rates,  the  same  as  if  lease  were 
negotiated  with  new  tenant. 

18.  The  minimum  charge  to  be  made  in  any  case  for  leasing  property  shall 
be  $10.00. 

19.  Should  there  be  a  clause  in  the  lease  giving  the  lessee  an  option  to  pur- 
chase the  property  demised,  whether  or  not  the  purchase  is  made   exactly  on 
the  terms  stipulated  in  the  lease,  the  owner  shall  pay  the  agent  who  negotiated 
the  lease  the  usual  commission  on  the  purchase  price,  to  be  paid  when  the  sale 
is  consummated,  less  any  portion  of  commission  paid  for  the  unexpired  term 
of  the  lease. 

20.  In  the  event  of  any  property  being  withdrawn  from  the  agent  prior  to 
the  expiration  of  any  lease,  or  leases,  made  by  the  said  agent,  the  owner  shall 
pay  the  said  agent  at  the  time  of  such  withdrawal,  or  the  agent  may  deduct 
from  funds  of  the  owner  in  said  agent's  hands  a  sum  equal  to  the  commission 
chargeable  under  this  schedule  for  the  unexpired  term  of  the  lease,  as  though 
the  agent  was  at  that  time  securing  a  tenant  for  the  owner  for  said  unexpired 
term.     (It  being  understood  that  on  a  lease  drawn  for  a  period  of  less  than 
one  year  the  commission  due  shall  be  based  on  the  annual  rental.) 

21.  The  commission  for  the  term  of  the  lease  has  been  earned  by  the  agent, 
and  is  due  and  payable,  when  the  agent  secures  a  tenant  who  is  accepted  by 
the  owner,  or  secures  a  tenant  upon  the  terms  authorized  by  the  owner. 

22.  For  services  rendered  in  attending  to  repairs,  the  broker  or  agent  shall  be 
entitled  to  charge  the  lessor  5%  of  the  gross  amount  expended. 

MORTGAGES 

23.  City.    For  obtaining  loans  (including  purchase  money  by  agreement  with 
borrower)    secured  by  first  mortgage  on  real  estate  in  the  city  and  county  of 
Philadelphia: 

A.  On  land,  farms,  vacant  lots,  hotel,  office  buildings,  clubs,  moving  picture 
halls,  garages,   stables,   theatres,   schools,    institutional    property,    churches,    sa- 
loons,  apartment  houses  or  flats,  factories,  warehouses,   mills,   industrial   sites, 
railroad    and   waterfront   or   wharf   properties,    and    all    industrial    and   other 
specialty  property,  the  charge  shall  be  not  less  than  3%  on  the  gross  amount 
loaned. 

B.  Collateral  and  advance  money  mortgages  by  special  agreement. 

C.  On  loans  secured  by  any  other  kind  of  real  estate  there  shall  be  a  charge 
of  not  less  than  2%  on  the  amount  loaned. 

24.  Suburban.     For  obtaining  loans  (including  purchase  money  by  agreement 
with  borrower)  secured  by  first  mortgage  on  improved  real  estate: 

In  built-up  communities  in  any  of  the  suburbs  or  in  any  counties  adjoining 
Philadelphia,  the  charge  shall  be  not  less  than  2%. 


APPENDIX  309 

25.  Farms.    On  farms  and  ground  the  charge  shall  be  5%. 

26.  No  loan  shall  be  made  for  a  lower  charge  than  $25.00. 

The   above   rates   for   mortgages   shall   also   apply   to   properties   outside   of 
Philadelphia. 

27.  Second  Mortgage  Loans.     For  obtaining  loans  on  second  mortgage,  the 
charge  shall  be  by  special  agreement. 

28.  In  all  cases  the  borrower  shall  pay,  in  addition  to  the  rates  mentioned 
above,  all  charges  for  drawing  papers,  for  examination  of  title,  or  title  insur- 
ance, for  fire  insurance,  recording,  etc. 

29.  If  the  agent  secures  a  loan  on  request  of  the  borrower,  the  borrower  shall 
be  liable  for  the  payment  of  the  commission  whether  the  loan  be  accepted  or  not. 

30.  Renewals.     For  securing  the  renewal  or  extension  of  loans  the  borrower 
shall  pay  at  the  same  rate  of  commission  when  the  term  is  not  less  than  three 
years   as  provided   in   the  preceding  paragraphs.     For   a  term  less  than  three 
years,  the  charge  shall  be  by  special  agreement. 

31.  For  collecting  mortgage   interest  and  looking  after  the  various  stipula- 
tions contained  in  the  mortgages,  the   agent  shall  make   a  charge   of  S%  on 
amount  collected. 

32.  Ground  Rents.    The  rates  of  commission  charged  for  negotiating  ground 
rents  shall  be  the  same  as  those  governing  sales  or  purchases  of  real  estate, 
based  on  total  amount  paid  as  consideration  for  the  ground  rent. 

EXPERT  TESTIMONY 

33.  For  expert  testimony  the  expert  will  have  earned  his  fee  upon  delivery 
of  his  opinion  to  his  client;  and  he  shall  be  entitled  to  make  a  further  charge 
of  not  less  than  $50.00  per  day  for  attendance  before  the  Board  of  View,  a 
Master,  or  in  Court. 

APPRAISEMENTS 

34.  The  Board  offers  its  official  appraisal  of  real  estate  to  its  members.    The 
fees  for  this  work  are  $15.00  for  the  first  $5,000  of  value;  $1.25  for  each  $1,000 
above  $5,000  up  to   and  including  $100,000,   and  $1  per  $1,000   in  excess  of 
$100,000. 


No.  76 

BROKERAGE  AGREEMENT 
COOK  COUNTY  REAL  ESTATE  BOARD 

CHICAGO,  ILL.,  19, 


To 


hereby  grant  you  for  a  period  of  one  year  from  this  date,  and  there- 
after until  this  agreement  is  revoked  in  writing,  the  exclusive  right  to  sell  the 
property  described  herein,  and  in  cpnsideration  of  your  accepting  said  agency, 

and  endeavoring  to  sell  said  property, agree  to  pay  you  a  commission  of 

. . .  .per  cent  of  the  price  obtained,  if  a  purchaser  is  procured  during  said  period, 
by  you  or  me,  or  any  one  else,  upon  the  terms  named,  or  upon  any  other  terms 
which  I  shall  accept. 


310    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

If  the  sale  is  not  made  within  thirty  days,  then,  upon  my  written  request  you 
are  to  list  said  property  for  sale  with  all  active  members  of  the  Cook  County 
Real  Estate  Board  by  filing  a  copy  hereof  at  the  Board  Rooms. 


(Owner) 
Legal  description  of  said  property  is :  , 

GIVE  ALL  THE  FACTS  YOU  CAN 


Fill  in  all  the  blanks,  if  possible,  and  add  anything  you  think  affects  the 
value  of  the  property. 

BUILDING  is  a Flat— House— Store  and  Flat— Store  only. 

No Street  Between  and  Streets 

No.  of  Stories  Heated  by No.  of  Rooms (If  Flats,  give 

number  in  each  Flat  separately)   Size  of  Building by feet 

Built  of  (Material) with front.     Foundation  is    (Material) 

When  was  the  Building  Built  ?  

INSIDE. — Is  the  Plumbing  old  style,  or  modern,  and  what  is  its  condition? 

How  many  B  ath  Rooms  ? How  many  Water  Closets  ? 

What  kind  of  Wood  is  the  trim? Of  what  Wood  are  the  Floors? 

Do  you  have  Mantels? Sideboards? Gas? Gas  Ranges? 

Electric  Light  ? Back  Porch  ? How  high  is  Basement  ? 

Kind  of  Floor  ? Is  there  Laundry  ? If  there  is  a  REAR  BUILD- 
ING, describe  it If  there  is  a  BARN,  describe  it 

SIZE  OF  LOT by feet  to foot  Alley;    front. 

Are  Special  Assessments  all  paid? How  much  unpaid?  $ 

What  Material  is  the  Street  Paving? Sidewalk ? Have  you 

Abstract  of  Title  ? Guaranty  Policy  ? Torrens  Certificate  ? 

What  are  the  Rents  per  Month?     (Give  each  Flat  or  Tenement  separately) 

Total,  $    per  Year 

PRICE,  $ Terms   INCUMBRANCE,  $ 

Due  19...  at per  cent  per  annum  interest.     ANNUAL  EX- 
PENSES.—Taxes,  $ Insurance,  $ Water,  $ Gas,  $ 

Coal,  $ Janitor,  $ Total,  $ 

WILL  EXCHANGE  FOR ... 

OWNER    Address , 

Dated  19....  Telephone  No 

REMARKS  . 


No.  77 

The  following  three  forms  may  be  used  in  connection  with  the  application 
for  a  mortgage  loan  made  through  a  broker. 

No.  71  a.  should  be  kept  by  the  broker  for  his  office  records. 

No.  77b.  should  be  signed  by  the  applicant  for  the  loan  and  retained  by  the 
broker.  It  contains  the  agreement  for  compensation  to  the  broker  for  placing 
the  loan. 

No.  77c.  is  a  form  of  aplication  sent  by  the  broker  to  lending  institution  and 
persons  whom  he  seeks  to  have  make  the  loan. 


APPENDIX  311 

No.  77a. 

APPLICATION  FOR  FIRST  MORTGAGE  LOAN 

1.  Property,  No St.,  Ave.,  PI.,  City  of 

State  of  Population  of  City  

2.  Amount  wanted,  $ ,  at  ....%,  for years. 

3.  Full  name  of  individual,  corporation  or  firm,  who  will  execute  the  Bond 
and  Mortgage.     If  a  corporation,  give  names  of  officers 

4.  (If  a  corporation)  Amount  of  paid-up  capital,  $ Surplus,  $ 

Please  draw  accurate  diagram  of  land  and  building  giving  exact  dimensions 

and  distance  from  nearest  corner.     Insert  names  of  streets. 

North 


West 


East 


South 


Please  show  on  diagram  location  of  other  prominent  buildings  in  vicinity. 
.Send  photograph  of  building  if  possible. 

5.  Size  of  land x Size  of  Building  (on  ground) x 

No.  of  stories  high  

6.  Year  built If  under  construction,  when  will  it  be  completed? 

7.  State  exact  nature  of  construction.     What  portion  of  building  is  steel,  rein- 
forced concrete  or  brick  ?  

8.  Purposes  of  use  

9.  Describe  interior  arrangement.     If  an  apartment  house,  give  number  of 
apartments  on  each  floor  and  number  of  rooms  in  each  apartment.    If  an  office 
building,  give  number  of  offices  on  each  floor.     If  stores,  how  many? 

( 

10.  Number  of  elevators:     Passenger?   Freight? 

11.  How  heated? How  lighted? 

12.  Total  annual  gross  rent   (when  fully  rented)   $ Amount  now 

rented Total  annual  expenses,  including  taxes,  but  not  including  interest 

on  mortgages,  $ 

13.  Nearest  street  railway  line  to  this  property 

14.  Owner's  value,  Land  $ Building  $ Total  $ 

15.  Assessed  by  City  for,  Land  $ Building  $ Total  $ 

On  what  percentage  of  value  is  the  assessment  fixed  by  Board  of  Assessors?. . . . 

16.  Present  mortgages  }$ ,  at  ....%,  held  by ,  due 19. . 

on  property        {$ ,  at %,  held  by ,  due 19 .. 

Will  holders  of  above  mortgages  accept  payment? 

17.  Who  will  show  property? Address 

18.  Business  of  borrower  

Name   of   applicant    

Address   

Telephone  number „  .. 


312    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  77b. 

DESCRIPTION  OF  LOAN 

Amount,  $ at per  cent  for years.     Bond  of 

secured  by mortgage  covering  premises  shown  on  diagram  and  known 

as  Nos Street. 

Dimensions  of  Ground  Dimensions  of  Building   

Number  of  Stories Building  Materials Purposes  of  Use 

Value  of  Ground,  $ Value  of  Building,  $ Total,  $ 

Assessed  Value:  Land,  $ Building,  $ Total,  $ 

Amount  of  Present  Mortgage,  $ Annual  Rent,  $ 


N 


l_ 


W 


REMARKS: 


The  undersigned  desiring  to  obtain  the  loan  described  above  hereby  employs 

as  broker  to  endeavor  to  obtain  said  loan,  and  said   

hereby  accepts  such  employment,  it  being  agreed  that  such  employment  shall 

continue  from  now  until  the day  of at  6  P.  M.  and  that  during 

that  time  the  undersigned  will  not  endeavor  to  obtain  such  loan  through  any 

other  source.     If  the  loan  be  obtained,  the  undersigned  shall  pay  said 

the  sum  of  $ to  cover  its  commission,  disbursements  for  title  insurance, 

survey,  drawing  bond  and  mortgage  and  any  other  necessary  papers,  mort- 
gage recording  tax,  recording  fees,  except  the  cost  of  satisfaction  of  existing 

liens.    If  said find  a  party  ready  and  willing  to  make  such  loan  but 

who  declines  to  make  the  same  because  the  title  is  defective  or  because  the 
Title  Company  examining  the  title  declines  to  insure  the  title,  the  undersigned 
shall  pay  said  sum.  If  before  the  expiration  of  the  period  of  this  employment 
the  undersigned  revoke  this  agreement  or  through  any  other  source  obtain  said 
loan,  the  same  sum  shall  be  paid  as  if  said  loan  had  been  obtained  through 

In  addition  to  the  above  agree  to  pay  any  war  stamp  tax 

that  may  be  necessary.  The  loan  is  to  be  closed  within  thirty  days  after  its 
acceptance. 

Address 


APPENDIX 


313 


No.  77c. 

New  York 19.... 

LOAN  WANTED  OF  $ at %  Interest  per  annum  for  

years  on  First  Mortgage  secured  by  the  Bond  of  on  the  prop- 
erty described  below.    Location  Dimensions  of  Ground  

Dimensions  of  Building No.  of  stories  Materials 

Purpose  of  use Owner's  Valuation,  $ Rent,  $ 

Remarks     ,  I,..,,,.,,,,.,,,,,,,,,,,,,, , , . . . 


L 


ir 


Nearest  Station: 
Subway    .... 
Elevated    ... 
Surface  Line 


No.  78 

BROKER'S  LISTING  CARD 


FOR  SALE 


Total 


TO  LET 
DESCRIPTION  OF  PREMISES 

Street  No.  of  Property   

Location  of  Property   

Between     

{Lot Valuation   of  Land 
House Valuation   of  Building 

Number  of  Stories Extension Number  of  Rooms 

Decorated   Price   Terms   Mortgage : 

1st at %,  due Held  by  

2d    at  %,  due  Held  by 

Rents : 

Store Leased  to 3d  Floor leased  to 

1st  Floor Leased  to  4th  Floor leased  to 

2d  Floor Leased  to   Total   

Improvements    Heated  by   

Hot  Water  Supply?  No Yes Remarks  

Possession    Keys   at    

Owner's    Name    

Residence  Address   


FOR  EXCHANGE 


Material 


314    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  79 

AGENCY  CONTRACT 

THIS  AGREEMENT,  made  this day  of 19 Between 

hereinafter  termed  the  Owner,  and  ADOLPH  SPEAR  & 

COMPANY,  a  domestic  corporation,  hereinafter  termed  Agent,  WITNESSETH 

WHEREAS  the  Owner  is  seized  of  the  property  known  as  No 

in  the  Borough  of  Manhattan,  City  of  New  York,  and  

WHEREAS  the  Agent  is  engaged  in  the  management  of  Real  Estate  and 
general  Real  Estate  brokerage  business  in  the  City  of  New  York ;  and, 

WHEREAS,  the  Owner  is  desirous  of  engaging  the  services  of  the  Agent  as 
sole  agent  in  the  manner  and  upon  the  terms  hereinafter  set  forth; 

Now  therefore  in  consideration  of  the  premises  and  the  sum  of  One  ($1.00) 
Dollar,  the  receipt  of  which  is  hereby  acknowledged,  and  other  good  and  valu- 
able considerations,  the  parties  hereto  have  agreed  as  follows: 

FIRST. — The  Owner  does  hereby  employ  and  retain  the  Agent  as  sole  agent 
for  and  in  connection  with  the  aforesaid  property  for  the  term  beginning  the 
day  of 192. .,  and  to  end  on  the  day  of 192. . 

SECOND. — It  is  further  understood  and  agreed  that  all  applications  for  space 
in  the  said  building  are  to  be  referred  to  the  Agent,  it  being  the  intention  that 
all  leases  and  other  arrangements  for  occupancy  in  the  said  building  or  portions 
thereof,  shall  be  referred  to  and  closed  by  the  Agent,  the  Owner  hereby  confer- 
ring the  necessary  authority  to  Agent  for  the  purposes  aforesaid,  and  the  Agent 
shall  receive  a  stipulated  commission  therefor,  as  hereinafter  set  forth. 

THIRD. — The  owner  agrees  to  pay  the  Agent  the  usual  and  customary  com- 
mission in  vogue  at  the  time  of  making  leases  for  space  in  said  building  as 
promulgated  by  the  Real  Estate  Board  of  New  York;  if  a  lease  be  made  by  a 
broker  other  than  the  Agent,  then  this  broker  shall  be  compensated  out  of  the 
commission,  as  above  set  forth,  as  and  when  the  same  is  received  by  the  Agent 
and  no  additional  charge  shall  be  made  by  the  Agent  to  the  Owner. 

FOURTH. — The  Owner  also  agrees  to  pay  the  Agent  the  aforesaid  commission 
on  the  renewal  of  any  leases. 

FIFTH. — It  is  agreed  that  all  commissions  that  become  due  hereunder  to  the 
Agent,  shall  in  each  instance  be  paid  when  the  leases  have  been  executed. 

SIXTH. — The  Owner  further  agrees  to  pay  the  Agent  two  and  one-half  per 
cent  of  the  amount  of  all  money  collected,  which  shall  be  deducted  each  month; 
a  statement  shall  be  rendered  monthly  by  the  Agent  to  the  Owner,  which  state- 
ment shall  show  all  income  and  disbursements,  and  a  check  for  the  balance  shall 
be  submitted  by  the  Agent  to  the  Owner;  for  the  said  commission,  the  Agent 
hereby  agrees  to  collect  the  rents  and  otherwise  generally  manage  the  property. 

SEVENTH. — It  is  further  understood  and  agreed  that  the  Agent  shall  employ 
the  necessary  help,  make  all  necessary  purchases,  advertise  when  necessary,  con- 
tract for  and  make  necessary  repairs  and  the  payment  therefor,  and  pay  for  all 
expenses  in  relation  to  the  operation  and  maintenance  of  the  building  for  the 
account  of  the  Owner,  such  expenses  to  be  deducted  monthly  and  vouchers 
therefor  shall  accompany  each  monthly  statement. 

EIGHTH. — The  Agent  is  hereby  authorized  to  take  any  action  at  law  or  equity 
which  it  should  deem  necessary  or  appropriate  for  the  purpose  of  enforcing  col- 
lection of  money  due  from  tenants  or  to  repossess  any  portion  of  the  premises 
which  may  be  necessary  or  convenient  for  the  management  thereof. 

NINTH. — It  is  further  understood  and  agreed  that  the  Agent  shall  place  for 
the  account  of  the  Owner,  supervise  and  attend  to  any  and  all  insurance  of  any 
kind  or  nature  that  may  be  needed  in  connection  with  the  aforesaid  property, 
and  any  "renewals"  of  insurance  policies  as  may  become  due;  it  is  further 


APPENDIX  315 

understood  and  agreed  that  the  Owner  shall  include  as  an  assured  party,  the 
name  of  the  Agent  in  the  policies  covering  general,  elevator  liability  and 
compensation  insurance. 

TENTH. — It  is  further  agreed  that  upon  the  termination  of  this  agreement, 
either  by  limitation,  or  by  giving  notice  in  the  manner  hereinafter  provided, 
said  Agent  shall  be  entitled  to  receive  one  per  centum  (1%)  upon  the  entire 
rents  that  may  thereafter  become  due  under  any  lease  or  renewal  negotiated 
and  consummated  by  said  Agent  down  to  the  expiration  of  said  lease  or  re- 
newal, and  said  percentage  shall,  in  that  event,  be  and  become  forthwith  due 
and  payable. 

ELEVENTH. — It  is  further  understood  and  agreed  that  unless  written  notice  is 
given  by  either  party  hereto  to  the  other  on  or  before  the  first  day  of  the  third 
month  preceding  the  expiration  hereof,  to  the  effect  that  it  is  the  desire  of  such 
party  not  to  renew  the  same,  then  this  contract  shall  continue  in  force  from 
year  to  year. 

This  agreement  shall  bind  and  benefit  the  personal  representatives,  successors 
and  assigns  of  the  parties. 

IN  WITNESS  WHEREOF,  the  parties  hereto  have  executed,  or  caused  to  be 
executed,  these  presents  by  the  properly  authorized  parties  and  the  appropriate 
seals  thereto  duly  affixed,  the  day  and  year  first  above  written. 
Witness: 

[L.  S.] 


As  to  Owner 

[L.  S.] 


As  to  Agent 

ADOLPH  SPEAR  &  COMPANY. 
By 


President. 


No.  80 

COMPLAINT 

Building Date 

Tenant Letter 

Location Telephone. 

Nature Person. . . . 


Referred  to Signed. 

Disposal     


This  complaint  must  be  investigated  at  once  and  report  made  of  your  finding. 


316    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  81 

BUILDING  MANAGER'S  ORDER  FORM 

Order  No... 


Mr 

Address Date 19. ... 

Please    Building 


EMPLOYEE:  Enter  Mechanics 
time,  and  material  received  on 
this  order,  sign  and  return  at 
once. 


Mechanic. 

Helper  ... 

Overtime,  Mechanic. 
Helper  ... 


...Days... 
...Days... 
...Days... 
...Days... 


.Hrs, 
.Hrs. 
.Hrs. 
.Hrs. 


Signed  Days Hrs. 


No.  82 

APPRAISAL  OF  REAL  ESTATE 

New  York..  ..19.. 


Mr. 


Dear  Sir: 

We  value  the  premises  situated  at as  shown  on  the  diagram; 

together  with  the  improvements  thereon,  consisting  of    

at 


This  appraisal  is  made  on  the  understanding,  and  is  accepted  on  the  con- 
dition that  no  member  of  the  corporation  making  it,  or  any  one  connected  with 
the  corporation  shall  be  called  upon  to  give  testimony  concerning  the  value  of 
the  property  appraised,  or  to  give  any  information  relating  to  it  in  or  before 
any  proceedings  at  law,  or  otherwise. 


APPENDIX  317 


No.  83 


THE  HOFFMAN  RULE  FOR  THE  VALUATION  OF 

SHORT  LOTS 


ot  of  ground  25  x  loo  feet 

Aggregate 

$1,000 

per  cent. 

10  x  25  feet 

$160  

16 

15  x  25  " 

235  

23.50 

20  x  25  " 

310  

31 

25  x  25  " 

375  

37.50 

30  x  25  " 

440  

44 

35  x  25  " 

500  

50 

40  x  25  " 

560  

56 

45  x  25  " 

615  

61.50 

50  x  25  " 

670  

67 

55  x  25  " 

715  

71.50 

60  x  25  " 

760  

76 

65  x  25  " 

800  

80 

70  x  25  " 

840  

84 

75  x  25  " 

875  

87.50 

80  x  25  " 

910  

91 

85  x  25  " 

935  

93.50 

90  x  25  " 

960  

96 

95  x  25  " 

980  

98 

100  x  25  " 

1,000  

100 

318    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

No.  84 

DAVIES  RULE 

Table  based  on  the  following  formula,  for  estimating  the  value  of  strips  of 
lot  25  feet  wide,  from  one  inch  to  one  hundred  and  twenty-five  feet,  for  each 
inch  of  depth,  and  from  one  hundred  and  twenty-five  feet,  to  two  hundred  feet 
for  each  foot  of  depth, 


Y  =  V1.45  (X 

+  .0352)  - 

-.226 

Depth 

Depth 

Depth 

Depth 

Ft.  In. 

Ratio 

Ft.  In. 

Ratio 

Ft.  In. 

Ratio 

Ft.  In. 

Ratio 

1" 

.00268 

1" 

.10603 

1" 

.18417 

1" 

.24965 

2" 

.00520 

2" 

.10784 

2" 

.18564 

2" 

.25091 

3" 

.00780 

3" 

.10960 

3" 

.18712 

3" 

.25219 

4" 

.01052 

4" 

.11141 

4" 

.18852 

4" 

.25340 

5" 

.01291 

5" 

.11322 

5" 

.19002 

5" 

.25470 

6" 

.01543 

6" 

.11463 

6" 

.19148 

6" 

.25596 

7" 

.01792 

7" 

.11677 

7" 

.19292 

7" 

.25717 

8" 

.02037 

8" 

.11852 

8" 

.19453 

8" 

.25840 

9" 

.02283 

9" 

.12021 

9" 

.19580 

9" 

.25971 

10" 

.02523 

10" 

.12200 

10" 

.19717 

10" 

.26090 

11" 

.02762 

11" 

.12385 

11" 

.19864 

11" 

.26218 

1' 

.03001 

5' 

.12549 

9' 

.20008 

13' 

.26343 

1" 

.03236 

1" 

.12719 

1" 

.20143 

1" 

.26466 

2" 

.03469 

2" 

.12889 

2" 

.20279 

2" 

.26588 

3" 

.03690 

3" 

.13660 

3" 

.20431 

3" 

.26712 

4" 

.03927 

4" 

.13229 

4" 

.20565 

4" 

.26829 

5" 

.04155 

5" 

.13396 

5" 

.20710 

5" 

.26955 

6" 

.04380 

6" 

.13565 

6" 

.20850 

6" 

.27078 

7" 

.04603 

7" 

.13731 

7" 

.20983 

7" 

.27195 

8" 

.04822 

8" 

.13896 

8" 

.21126 

8" 

.27320 

9" 

.05044 

9" 

.14063 

9" 

.21265 

9" 

.27441 

10" 

.05260 

10" 

.14226 

10" 

.21392 

10" 

.27557 

11" 

.05473 

11" 

.14389 

11" 

.21539 

11" 

.27681 

2' 

.05691 

6' 

.14554 

10' 

.21676 

14' 

.27803 

1" 

.05903 

1" 

.14768 

1" 

.21812 

1" 

.27917 

2" 

.06104 

2" 

.14876 

2" 

.21947 

2" 

.28043 

3" 

.06325 

3" 

.15038 

3" 

.22084 

3" 

.28161 

4" 

.06532 

4" 

.15192 

4" 

.22212 

4" 

.28275 

5" 

.06739 

5" 

.15357 

5" 

.22353 

5" 

.28397 

6" 

.06945 

6" 

.15518 

6" 

.22488 

6" 

.28517 

7" 

.07148 

7" 

.15674 

7" 

.22616 

7" 

.28630 

8" 

.07349 

8" 

.15831 

8" 

.22754 

8" 

.28751 

9" 

.07552 

9" 

.15989 

9" 

.22888 

9" 

.28870 

10" 

.07751 

10" 

.16145 

10" 

.23016 

10" 

.28982 

11" 

.07949 

11" 

.16291 

11" 

.23153 

11" 

.29103 

3' 

.08147 

7' 

.16456 

11' 

.23285 

15' 

.29221 

1" 

.08343 

1" 

.16610 

1" 

.23415 

1" 

.29333 

2" 

.08536 

2" 

.16763 

2" 

.23546 

2" 

.29453 

3" 

.08731 

3" 

.16918 

3" 

.23678 

3" 

.29569 

4" 

.08923 

4" 

.17064 

4" 

.23803 

4" 

.29680 

5" 

.09114 

5" 

.17221 

5" 

.23937 

5" 

.29800 

6" 

.09305 

6" 

.17374 

6" 

.24068 

6" 

.29916 

7" 

.09493 

7" 

.17524 

7" 

.24192 

7" 

.30026 

8" 

.09680 

8" 

.17673 

8" 

.24325 

8" 

.30144 

9" 

in" 

.09868 

t  (\r\et 

9" 

<  /\f/ 

.17825 

9" 

.24455 

9" 

.30260 

APPENDIX 


319 


Depth 

Depth 

Depth 

Depth 

Ft. 

In. 

Ratio 

Ft.  In. 

Ratio 

Ft.  In. 

Ratio 

Ft.  In. 

Ratio 

I" 

.30710 

1" 

.35898 

1" 

.40661 

1" 

.45091 

2" 

.30827 

2" 

.36004 

2" 

.40760 

2" 

.45183 

3" 

.30941 

3" 

.36108 

3" 

.40856 

3" 

.45272 

4" 

.31049 

4" 

.36207 

4" 

.40947 

4" 

.45358 

5" 

.31165 

5" 

.36314 

5" 

.41045 

5" 

.45449 

6" 

.31279 

6" 

.36416 

6" 

.41141 

6" 

.45539 

7" 

.31386 

7" 

.36514 

7" 

.41232 

7" 

.45624 

8" 

.31502 

8" 

.36620 

8" 

.41329 

8" 

.45715 

9" 

.31614 

9" 

.36722 

9" 

.41425 

9" 

.45804 

10" 

.31721 

10" 

.36820 

10" 

.41519 

10" 

.45889 

11" 

.31836 

11" 

.36925 

11" 

.41612 

11" 

.45980 

17' 

.31947 

21' 

.37027 

25' 

.41707 

29' 

.46069 

1" 

.32054 

1" 

.37124 

1" 

.41797 

1" 

.46153 

2" 

.32167 

2" 

.37229 

2" 

.41894 

2" 

.46244 

3" 

.32279 

3" 

.37330 

3" 

.41998 

3" 

.46332 

4" 

.32384 

4" 

.37427 

4" 

.42078 

4" 

.46416 

5" 

.32497 

5" 

.37531 

5" 

.42174 

5" 

.46507 

6" 

.32608 

6" 

.37632 

6" 

.42268 

6" 

.46595 

7" 

.32713 

7" 

.37728 

7" 

.42358 

7" 

.46678 

8" 

.32825 

8" 

.37832 

8" 

.42454 

8" 

.46768 

9" 

.32929 

9" 

.37932 

9" 

.42547 

9" 

.46856 

10" 

.33040 

10" 

.38028 

10" 

.42636 

10" 

.46943 

11" 

.33151 

11" 

.38131 

11" 

.42732 

11" 

.47030 

18' 

.33261 

22' 

.38231 

26' 

.42825 

30' 

.47117 

1" 

.33358 

1  " 

.38326 

1" 

.42913 

1" 

.47200 

2" 

.33476 

2" 

.38428 

2" 

.43009 

2" 

.47289 

3" 

.33584 

3" 

.38528 

3" 

.43101 

3" 

.47376 

4" 

.33687 

4" 

.38623 

4" 

.43190 

4" 

.47469 

5" 

.33798 

5" 

.38725 

5" 

.43284 

5" 

.47548 

6" 

.33906 

6" 

.38824 

6" 

.43377 

6" 

.47635 

7" 

.34002 

7" 

.38928 

7" 

.43464 

7" 

.47717 

8" 

.34118 

8" 

.39020 

8" 

.43559 

8" 

.47806 

9" 

.34226 

9" 

.39118 

9" 

.43651 

9" 

.47892 

10" 

.34328 

10" 

.39212 

10" 

.43738 

10" 

.47975 

11" 

.34437 

11" 

.39313 

11" 

.43832 

11" 

.48063 

19' 

.34544 

23' 

.39411 

27' 

.43924 

31' 

.48149 

1" 

.34645 

1" 

.39505 

1" 

.44011 

1" 

.48231 

2" 

.34754 

2" 

.39605 

2" 

.44104 

2" 

.48319 

3" 

.34860 

3" 

.39703 

3" 

.44196 

3" 

.48405 

4" 

.34961 

4" 

.39796 

4" 

.44282 

4" 

.48486 

5" 

.35069 

5" 

.39896 

5" 

.44376 

5" 

.48574 

6" 

.35175 

6" 

.39993 

6" 

.44464 

6" 

.48659 

7" 

.35275 

7" 

.40086 

7" 

.44553 

7" 

.48741 

8" 

.35383 

8" 

.40185 

8" 

.44646 

8" 

.48828 

9" 

.35487 

9" 

.40282 

9" 

.44736 

9" 

.48913 

10" 

.35587 

10" 

.40374 

10" 

.44822 

10" 

.48994 

11" 

.35627 

11" 

.40473 

11" 

.44915 

11" 

.49081 

20' 

.35799 

24' 

.40570 

28' 

.45005 

32' 

.49166 

320    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 


Depth 

Depth 

Depth 

Depth 

Ft. 

In. 

Ratio 

Ft.  In. 

Ratio 

Ft.  In. 

Ratio 

Ft.  In. 

Ratio 

I" 

.49247 

1" 

.53176 

1" 

.56911 

1" 

.60478 

2" 

.49334 

2" 

.53258 

2" 

.56989 

2" 

.60553 

3" 

.49418 

3" 

.53339 

3" 

.57066 

3" 

.60627 

4" 

.49499 

4" 

.53415 

4" 

.57139 

4" 

.60696 

5" 

.49585 

5" 

.53497 

5" 

.57217 

5" 

.60771 

6" 

.49670 

6" 

.53577 

6" 

.57293 

6" 

.60844 

7" 

.49750 

7" 

.53653 

7" 

.57366 

7" 

.60914 

8" 

.49836 

8" 

.53735 

8" 

.57445 

8" 

.60988 

9" 

.49920 

9" 

.53814 

9" 

.57520 

9" 

.61061 

10" 

.50000 

10" 

.53890 

10" 

.57592 

10" 

.61130 

11" 

.50086 

11" 

.53972 

11" 

.57670 

11" 

.61205 

31 

.50170 

37' 

.54051 

41' 

.57746 

45' 

.61277 

I" 

.50249 

1" 

.54127 

1" 

.57818 

1" 

.61346 

2" 

.50335 

2" 

.54208 

2" 

.57895 

2" 

.61421 

3" 

.50418 

3" 

.54287 

3" 

.57971 

3" 

.61493 

4" 

.50498 

4" 

.54363 

V 

.58043 

4" 

.61562 

5" 

.50583 

5" 

.54444 

5" 

.58119 

5" 

.61636 

6" 

.50666 

6" 

.54523 

6" 

.58195 

6" 

.61709 

7" 

.50745 

7" 

.54598 

7" 

.58267 

7" 

.61777 

8" 

.50830 

8" 

.54676 

8" 

.58344 

8" 

.61851 

9" 

.50913 

9" 

.54757 

9" 

.58419 

9" 

.61923 

10" 

.50992 

10" 

.54832 

10" 

.58491 

10" 

.61992 

11" 

.51077 

11" 

.54913 

11" 

.58568 

11" 

.62065 

34' 

.51159 

38' 

.54991 

42' 

.58643 

46' 

.62137 

1" 

.51238 

1" 

.55066 

1" 

.58714 

1" 

.62206 

2" 

.51322 

2" 

.55146 

2" 

.58791 

2" 

.62279 

3" 

.51404 

3" 

.55225 

3" 

.58866 

3" 

.62351 

4" 

.51483 

4" 

.55299 

4" 

.58937 

4" 

.62419 

5" 

.51567 

5" 

.55379 

5" 

.59013 

5" 

.62492 

6" 

.51649 

6" 

.55457 

6" 

.59088 

6" 

.62564 

7" 

.51727 

7" 

.55531 

7", 

.59159 

7" 

.62632 

8" 

.51811 

8" 

.55611 

8" 

.59235 

8" 

.62705 

9" 

.51893 

9" 

.55689 

9" 

.59309 

9" 

.62777 

10" 

.51971 

10" 

.55763 

10" 

.59380 

10" 

.62844 

11" 

.52054 

11" 

.55843 

11" 

.59456 

11" 

.62917 

35f 

.52136 

39' 

.55920 

43' 

.59530 

47' 

.62989 

1" 

.52213 

1" 

.55994 

1" 

.59601 

1" 

.63056 

2" 

.52296 

2" 

.56073 

2" 

.59677 

2" 

.63129 

3" 

.52378 

3" 

.56151 

3" 

.59751 

3" 

.63200 

4" 

.52455 

4" 

.56224 

4" 

.59821 

4" 

.63268 

5" 

.52542 

5" 

.56303 

5" 

.59897 

5" 

.63340 

6" 

.52619 

6" 

.56380 

6" 

.59971 

6" 

.63411 

7" 

.52696 

7" 

.56454 

7" 

.60040 

7" 

.63478 

8" 

.52779 

8" 

.56533 

8" 

.60116 

8" 

.63551 

9" 

.52860 

9" 

.56610 

9" 

.60190 

9" 

.63622 

10" 

.52936 

10" 

.56683 

10" 

.60260 

10" 

.63690 

11" 

.53019 

11" 

.56761 

11" 

.60335 

11" 

.63761 

36' 

.53099 

40' 

.56838 

44' 

.60408 

48' 

.63832 

APPENDIX 


321 


Depth 

Depth 

Depth 

Depth 

Ft. 

In. 

Ratio 

Ft.  In. 

Ratio 

Ft.  In. 

Ratio 

Ft.  In. 

Ratio 

1" 

.63899 

1" 

.67189 

1" 

.70362 

1" 

.73431 

2" 

.63971 

2" 

.67258 

2" 

.70429 

2" 

.73496 

3" 

.64041 

3" 

.67326 

3" 

.70495 

3" 

.73560 

4" 

.64108 

4" 

.67390 

4" 

.70557 

4" 

.73620 

5" 

.64180 

5" 

.67460 

5" 

.70624 

5" 

.73685 

6" 

.64250 

6" 

.67527 

6" 

.70689 

6" 

.73748 

7" 

.64317 

7" 

.67592 

7" 

.70752 

7" 

.73808 

8" 

.643C8 

8" 

.67650 

8" 

.70818 

8" 

.73873 

9" 

.64459 

9" 

.67728 

9" 

.70883 

9" 

.73936 

10" 

.64525 

10" 

.67792 

10" 

.70946 

10" 

.73996 

11" 

.64596 

11" 

.67861 

11" 

.71012 

11" 

.74060 

49' 

.64666 

53' 

.67929 

57' 

.71077 

61' 

.74123 

1" 

.64733 

1  " 

.67992 

1" 

.71139 

1" 

.74183 

2" 

.64804 

2" 

.68061 

2" 

.71206 

2" 

.74248 

3" 

.64874 

3" 

.68129 

3" 

.71270 

3" 

.74311 

4" 

.64942 

4" 

.68192 

4" 

.71332 

4" 

.74370 

5" 

.65011 

5" 

.68261 

5" 

.71399 

5" 

.74435 

6" 

.65081 

6" 

.68328 

6" 

.71463 

6" 

.74497 

7" 

.65147 

7" 

.68381 

7" 

.71525 

7" 

.74557 

8" 

.65218 

8" 

.68460 

8" 

.71591 

8" 

.74621 

9" 

.65287 

9" 

.68527 

9" 

.71656 

9" 

.74684 

10" 

.65353 

10" 

.68591 

10" 

.71717 

10" 

.74744 

11" 

.65424 

11" 

.68659 

11" 

.71783 

11" 

.74808 

50' 

.65493 

54' 

.68726 

58' 

.71848 

62' 

.74870 

1" 

.65559 

1" 

.68772 

1" 

.71909 

I* 

.74930 

2" 

.65630 

2" 

.68858 

2" 

.71975 

2" 

.74993 

3" 

.65699 

3" 

.68924 

3" 

.72040 

3" 

.75056 

4" 

.65764 

4" 

.68987 

4" 

.72101 

4" 

.75115 

5" 

.65835 

5" 

.69055 

5" 

.72167 

5" 

.75179 

6" 

.65904 

6" 

.69122 

6" 

.72231 

6" 

.75241 

7" 

.65969 

7" 

.69185 

7" 

.72294 

7" 

.75301 

8" 

.66039 

8" 

.69253 

8" 

.72358 

8" 

.75364 

9" 

.66108 

9" 

.69319 

9" 

.72426 

9" 

.75426 

10" 

.66174 

10" 

.69382 

10" 

.72483 

10" 

.75486 

11" 

.66244 

11" 

.69450 

11" 

.72548 

11" 

.75549 

51' 

.66312 

55' 

.69516 

59' 

.72612 

63' 

.75611 

r 

.66378 

1" 

.69579 

1" 

.72673 

1" 

.75670 

2" 

.66448 

2" 

.69647 

2" 

.72739 

2" 

.75734 

3" 

.66516 

3" 

.69713 

3" 

.72803 

3" 

.75795 

4" 

.66581 

4" 

.69777 

4" 

.72863 

4" 

.75854 

5" 

.66651 

5" 

.69843 

5" 

.72929 

5" 

.75918 

6" 

.66719 

6" 

.69909 

6" 

.72292 

6" 

.75979 

7" 

.66784 

7" 

.69972 

7" 

.73053 

7" 

.76038 

8" 

.66854 

8" 

.70039 

8" 

.73118 

8" 

.76101 

9" 

.66922 

9" 

.70105 

9" 

.73182 

9" 

.76163 

10" 

.66987 

10" 

.70167 

10" 

.73242 

10" 

.76222 

11" 

.67056 

11" 

.70234 

11" 

.73307 

11" 

.76285 

52' 

.67124 

56' 

.70300 

60' 

.73371 

64' 

.76347 

322    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 


Depth 

Depth 

Depth 

Depth 

Ft. 

In. 

Ratio 

Ft.  In. 

Ratio 

F*  In. 

Ratio 

Ft.  In. 

Ratio 

1" 

.76405 

1" 

.79292 

I" 

.82100 

I" 

.84834 

2" 

.76466 

2" 

.79353 

2" 

.82159 

2" 

.84892 

3" 

.76530 

3" 

.79413 

3" 

.82217 

3" 

.84948 

4" 

.76588 

4" 

.79469 

4" 

.82272 

4" 

.85002 

5" 

.76651 

5" 

.79531 

5" 

.82332 

5" 

.85060 

6" 

.76712 

6" 

.79591 

6" 

.82390 

6" 

.85117 

7" 

.76771 

7" 

.79647 

7" 

.82445 

7" 

.85171 

8" 

.76833 

8" 

.79708 

8" 

.82505 

8" 

.85229 

9" 

.76895 

9" 

.79767 

9" 

.82562 

9" 

.85285 

10" 

.76953 

10" 

.79825 

10" 

.82618 

10" 

.85339 

11" 

.77015 

11" 

.79885 

11" 

.82677 

11" 

.85396 

65' 

.77077 

69' 

.79944 

73' 

.82735 

77' 

.85453 

1" 

.77135 

1" 

.80001 

1" 

.82790 

1" 

.85506 

2" 

.77197 

2" 

.80062 

2" 

.82849 

2" 

.85564 

3" 

.77258 

3" 

.80121 

3" 

.82907 

3" 

.85621 

4" 

.77316 

4" 

.80178 

4" 

.82962 

4" 

.85674 

5" 

.77379 

5" 

.80238 

5" 

.83021 

5" 

.85731 

6" 

.77439 

6" 

.80297 

6" 

.83078 

6" 

.85788 

7" 

.77498 

7" 

.80354 

7" 

.83133 

7" 

.85842 

8" 

.77560 

8" 

.80414 

8" 

.83192 

8" 

.85898 

9" 

.77621 

9" 

.80474 

9" 

.83250 

9" 

.85955 

10" 

.77678 

10" 

.80530 

10" 

.83305 

10" 

.86012 

11" 

.77740 

11" 

.80590 

11" 

.83363 

11" 

.86066 

66' 

.77801 

70' 

.80649 

74' 

.83421 

78' 

.86122 

1" 

.77859 

1" 

.80705 

1" 

.83473 

1" 

.86175 

2" 

.77921 

2" 

.80766 

2" 

.83535 

2" 

.86232 

3" 

.77982 

3" 

.80825 

3" 

.83592 

3" 

.86288 

4" 

.78039 

4" 

.80881 

4" 

.83646 

4" 

.86342 

5" 

.78101 

5" 

.80941 

5" 

.83705 

5" 

.86399 

6" 

.78162 

6" 

.81000 

6" 

.83762 

6" 

.86455 

7" 

.78219 

7" 

.81060 

7" 

.83817 

7" 

.86508 

8" 

.78281 

8" 

.81128 

8" 

.83875 

8" 

.86565 

9" 

.78341 

9" 

.81175 

9" 

.83933 

9" 

.86621 

10" 

.78399 

10" 

.81230 

10" 

.83987 

10" 

.86674 

11" 

.78461 

11" 

.81290 

11" 

.84045 

11" 

.86731 

67' 

.78521 

71' 

.81349 

75' 

.84102 

79' 

.86786 

1" 

.78578 

1" 

.81407 

1" 

.84157 

1" 

.86840 

2" 

.78640 

2" 

.81465 

2" 

.84215 

2" 

'86895 

3" 

.78700 

3" 

.81523 

3" 

.84272 

3" 

.86952 

4" 

.78757 

4" 

.81579 

4" 

.84327 

4" 

.87005 

5" 

.78818 

5" 

.81639 

5" 

.84385 

5" 

.87062 

6" 

.78878 

6" 

.81697 

6" 

.84442 

6" 

.87117 

7" 

.78936 

7" 

.81753 

7" 

.84497 

7" 

.87170 

8" 

.79997 

8" 

.81812 

8" 

.84552 

8" 

.87227 

9" 

.79057 

9" 

.81871 

9" 

.84611 

9" 

.87283 

10" 

.79114 

10" 

.81926 

10" 

.84665 

10" 

.87335 

11" 

.79175 

11" 

.81986 

11" 

.84723 

11" 

.87392 

68' 

.79233 

72' 

.82044 

76' 

.84780 

80' 

.87447 

APPENDIX 


323 


Depth 

Depth 

Depth 

Depth 

Ft. 

In. 

Ratio 

Ft.  In. 

Ratio 

JFA  In. 

Ratio 

Ft.  In. 

Ratio 

I" 

.87500 

1" 

.90103 

1" 

.92647 

1" 

.95137 

2" 

.87557 

2" 

.90159 

2" 

.92702 

2" 

.95190 

3" 

.87612 

3" 

.90212 

3" 

.92754 

3" 

.95242 

4" 

.87665 

4" 

.90264 

4" 

.92850 

4" 

.85291 

5" 

.87721 

5" 

.90319 

5" 

.92859 

5" 

.95344 

6" 

.87776 

6" 

.90373 

6" 

.92912 

6" 

.95395 

7" 

.87829 

7" 

.90425 

7" 

.92962 

7" 

.95444 

8" 

.87895 

8" 

.90480 

8" 

.93016 

8" 

.95497 

9" 

.87944 

9" 

.90533 

9" 

.93068 

9" 

.95549 

10" 

.87993 

10" 

.90584 

10" 

.93118 

10" 

.95598 

11" 

.88047 

11" 

.90639 

11" 

.93172 

11" 

.95651 

81' 

.88104 

85' 

.90694 

89' 

.93225 

93' 

.95702 

1" 

.88157 

1" 

.90745 

1" 

.93275 

1" 

.95751 

2" 

.88213 

2" 

.90800 

2" 

.93328 

2" 

.95804 

3" 

.88268 

3" 

.90853 

3" 

.93331 

3" 

.95855 

4" 

.88320 

4" 

.90904 

4" 

.93431 

4" 

.95904 

5" 

.88376 

5" 

.90959 

5" 

.93475 

5" 

.95957 

6" 

.88431 

6" 

.91013 

6" 

.93538 

6" 

.96008 

7" 

.88484 

7" 

.91064 

r 

.93587 

7" 

.96057 

8" 

.88519 

8" 

.91119 

8" 

.93641 

8" 

.96110 

9" 

.88594 

9" 

.91173 

9" 

.93694 

9" 

.96161 

10" 

.88646 

10" 

.91225 

10" 

.93743 

10" 

.96210 

11" 

.88703 

11" 

.91278 

11" 

.93797 

11" 

.96262 

82' 

.88753 

86' 

.91331 

90' 

.93849 

94' 

.96314 

I" 

.88809 

1" 

.91383 

1" 

.93900 

1" 

.96362 

2" 

.88865 

2" 

.91437 

2" 

.93952 

2" 

.96428 

3" 

.88920 

3" 

.91491 

3" 

.94005 

3" 

.96466 

4" 

.88972 

4" 

.91542 

4" 

.94054 

4" 

.96515 

5" 

.89027 

5" 

.91592 

5" 

.94108 

5" 

.96567 

6" 

.89082 

6" 

.91649 

6" 

.94160 

6" 

.96618 

7" 

.89134 

7" 

.91700 

7" 

.94209 

7" 

.96667 

8" 

.89190 

8" 

.91754 

8" 

.94263 

8" 

.96719 

9" 

.89244 

9" 

.91808 

9" 

.94315 

9" 

.96770 

10" 

.89296 

10" 

.91859 

10" 

.94365 

10" 

.96819 

11" 

.89352 

11" 

.91913 

11" 

.94418 

11" 

.96871 

83' 

.89406 

87' 

.91966 

91' 

.94470 

95' 

.96921 

1" 

.89458 

1" 

.92017 

1" 

.94520 

1" 

.96970 

2" 

.89514 

2" 

.92071 

2" 

.94561 

2" 

.97022 

3" 

.89568 

3" 

.92122 

3" 

.94625 

3" 

.97073 

4" 

.89620 

4" 

.92175 

4" 

.94674 

4" 

.97122 

5" 

.89675 

5" 

.92229 

5" 

.94727 

5" 

.97174 

6" 

.89730 

6" 

.92282 

6" 

.94780 

6" 

.97225 

7" 

.89781 

7" 

.92333 

7" 

.94829 

7" 

.97276 

8" 

.89837 

8" 

.92387 

8" 

.94882 

8" 

.97322 

9" 

.89891 

9" 

.92440 

9" 

.94934 

9" 

.97376 

10" 

.89942 

10" 

.92490 

10" 

.94983 

10" 

.97424 

11" 

.89998 

11" 

.92544 

11" 

.95036 

11" 

.97474 

84' 

.90052 

88' 

.92597 

92' 

.95088 

96' 

.97526 

324   REAL  ESTATE  PRINCIPLES  AND  PRACTICES. 


Depth 

Depth 

Depth 

Depth 

Ft. 

In. 

Ratio 

Ft.  In. 

Ratio 

Ft.  In. 

Ratio 

Ft.  In. 

Ratio 

1" 

.97575 

1" 

.99967 

1" 

1.02310 

1" 

1.04610 

2" 

.97627 

2" 

1.00016 

2" 

1.02358 

2" 

1.04658 

3" 

.97677 

3" 

1.00065 

3" 

1.02407 

3" 

1.04705 

4" 

.97726 

4" 

1.00114 

4" 

1.02455 

4" 

1.04753 

5" 

.97777 

5" 

1.00163 

5" 

1.02503 

5" 

1.04801 

6" 

.97828 

6" 

1.00212 

6" 

1.02551 

6" 

1.04848 

7" 

.97876 

7" 

1.00261 

7" 

1.02600 

7" 

1.04895 

8" 

.97928 

8" 

1.00310 

8" 

1.02648 

8" 

1.04943 

9" 

.97978 

9" 

1.00359 

9" 

1.02696 

9" 

1.04990 

10" 

.98026 

10" 

1.00408 

10" 

1.02744 

10" 

1.05037 

11" 

.98076 

11" 

1.00458 

11" 

1.02793 

11" 

1.05085 

97' 

.98129 

101' 

1.00507 

105' 

1.02841 

109' 

1.05132 

1" 

.98177 

1" 

1.00556 

1" 

1.02889 

1" 

1.05179 

2" 

.98228 

2" 

1.00605 

2" 

1.02937 

2" 

1.05226 

3" 

.98279 

3" 

1.00654 

3" 

1.02985 

3" 

1.05274 

4" 

.98327 

4" 

1.00703 

4" 

1.03033 

4" 

1.05321 

5" 

.98378 

5" 

1.00752 

5" 

1.03082 

5" 

1.05368 

6" 

.98428 

6" 

1.00801 

6" 

1.03130 

6" 

1.05415 

7" 

.98477 

7" 

1.00850 

7" 

1.03178 

7" 

1.05462 

8" 

.98528 

8" 

1.00899 

8" 

1.03226 

8" 

1.05510 

9" 

.98578 

9" 

1.00948 

9" 

1.03274/ 

9" 

1.05557 

10" 

.98626 

10" 

1.00997 

10" 

1.03322 

10" 

1.05604 

11" 

.98677 

11" 

1.01046 

11" 

1.03370 

11" 

1.05651 

98' 

.98728 

102' 

1.01095 

106' 

1.03418 

110' 

1.05698 

1" 

.98776 

1" 

1.01144 

1" 

1.03465 

1" 

1.05745 

2" 

.98827 

2" 

1.01193 

2" 

1.03513 

2" 

1.05792 

3" 

.98877 

3" 

1.01241 

3" 

1.03561 

3" 

1.05839 

4" 

.98925 

4" 

1.01290 

4" 

1.03609 

4" 

1.05886 

5" 

.98976 

5" 

1.01339 

5" 

1.03657 

5" 

1.05933 

6" 

.99026 

6" 

1.01388 

6" 

1.03705 

6" 

1.05980 

7" 

.99074 

7" 

1.01436 

7" 

1.03752 

7" 

1.06027 

8" 

.99125 

8" 

1.01485 

8" 

1.03800 

8" 

1.06074 

9" 

.99175 

9" 

1.01534 

9" 

1.03848 

9" 

1.06121 

10" 

.99223 

10" 

1.01582 

10" 

1.03896 

10" 

1.06168 

11" 

.99274 

11" 

1.01631 

11" 

1.03943 

11" 

1.06215 

99' 

.99324 

103' 

1.01680 

107' 

1.03991 

111' 

1.06262 

1" 

.99371 

1" 

1.01728 

1" 

1.04039 

1" 

1.06309 

2" 

.99422 

2" 

1.01777 

2" 

1.04087 

2" 

1.06356 

3V 

.99472 

3" 

1.01825 

3" 

1.04135 

3" 

1.06403 

4" 

.99520 

4" 

1.01874 

4" 

1.04183 

4" 

1.06449 

5" 

.99572 

5" 

1.01923 

5" 

1.04230 

5" 

1.06496 

6" 

.99621 

6" 

1.01971 

6" 

1.04277 

6" 

1.06543 

7" 

.99668 

7" 

1.02019 

7" 

1.04325 

7" 

1.06590 

8" 

.99719 

8" 

1.02067 

8" 

1.04373 

8" 

1.06637 

9" 

.99769 

9" 

1.02116 

9" 

1.04420 

9" 

1.06683 

10" 

.99818 

10" 

1.02164 

10" 

1.04468 

10" 

1.06730 

11" 

.99868 

11" 

1.02213 

11" 

1.04516 

11" 

1.06777 

100' 

.99917 

104' 

1.02261 

108' 

1.04563 

112' 

1.06823 

APPENDIX 


325 


Depth 

Depth 

Depth 

Depth 

Feet 

Ratio 

Feet 

Ratio 

Feet 

Ratio 

Feet 

Ratio 

1" 

.06870 

1" 

.09091 

1" 

.11275 

1" 

.13424 

2" 

.06917 

2" 

.09137 

2" 

.11320 

2" 

.13468 

3" 

.06963 

3" 

.09183 

3" 

.11365 

3" 

.13513 

4" 

.07010 

4" 

.09228 

4" 

.11411 

4" 

.13557 

5" 

.07057 

5" 

.09274 

5" 

.11456 

5" 

.13601 

6" 

.07103 

6" 

.09320 

6" 

.11500 

6" 

.13646 

7" 

.07150 

7" 

.09366 

7" 

.11545 

7" 

.13691 

8" 

.07196 

8" 

.09412 

8" 

.11590 

8" 

.13735 

9" 

.07243 

9" 

.09457 

9" 

.11635 

9" 

.13779 

10" 

.07289 

10" 

.09503 

10" 

.11680 

10" 

.13823 

11" 

.07336 

11" 

.09549 

11" 

.11725 

11" 

.13868 

113' 

1.07382 

117' 

.09595 

121' 

.11770 

125' 

L.13912 

1" 

1.07429 

1" 

1.09640 

1" 

1.11815 

126' 

1.14442 

2" 

1.07475 

2" 

.09686 

2" 

1.11860 

127' 

.14970 

3" 

1.07522 

3" 

.09732 

3" 

1.11905 

128' 

.15496 

4" 

1.07569 

4" 

.09778 

4" 

1.11950 

129' 

.16020 

5" 

1.07615 

5" 

.09823 

5" 

.11995 

130' 

.16542 

6" 

1.07661 

6" 

.09868 

6" 

.12040 

131' 

.17062 

7" 

1.07707 

7" 

.09914 

7" 

.12084 

132' 

.17580 

8" 

1.07754 

8" 

.09960 

8" 

.12129 

133' 

.18096 

9" 

1.07800 

9" 

.10005 

9" 

.12174 

134' 

.18611 

10" 

1.07846 

10" 

.10051 

10" 

.12219 

135' 

.19123 

11" 

1.07893 

11" 

.10097 

11" 

.12264 

136' 

.19633 

114' 

1.07939 

118' 

.10142 

122' 

.12309 

137' 

.20142 

1" 

1.07985 

1" 

1.10187 

1" 

.12354 

138' 

.20649 

2" 

1.08031 

2" 

1.10233 

2" 

.12399 

139' 

.21155 

3" 

1.08078 

3" 

1.10278 

3" 

.12443 

140' 

.21658 

4" 

1.08124 

4" 

1.10324 

4" 

.12488 

141' 

.22160 

5" 

1.08170 

5" 

1.10370 

5" 

.12533 

142' 

.22760 

6" 

1.08216 

6" 

1.10415 

6" 

.12577 

143' 

.23158 

7" 

1.08262 

7" 

1.10460 

7" 

.12622 

144' 

.23654 

8" 

1.08308 

8" 

1.10506 

8" 

.12667 

145'      ] 

1.24149 

9" 

1.08355 

9" 

1.10551 

9" 

.12711 

146'      ] 

[.24643 

10" 

1.08401 

10" 

1.10596 

10" 

.12756 

147'      ] 

1.25134 

11" 

1.08447 

11" 

1.10642 

11" 

.12801 

148'      ] 

1.25624 

115' 

1.08493 

119' 

1.10687 

123' 

.12845 

149'      ] 

1.26113 

1" 

1.08539 

1" 

1.10732 

1" 

.12890 

150'      ] 

1.26599 

2" 

1.08585 

2" 

1.10778 

2" 

.12935 

151'      1 

[.27084 

3" 

1.08631 

3" 

1.10823 

3" 

.12979 

152'      1 

[.27568 

4" 

1.08677 

4" 

1.10868 

4" 

.13023 

153'      ] 

[.28050 

5" 

1.08724 

5" 

1.10913 

5" 

.13068 

154'      ] 

1.28530 

6" 

1.08770 

6" 

1.10958 

6" 

.13113 

155'      ] 

1.29009 

7" 

1.08816 

7" 

1.11004 

7" 

.13157 

156'      : 

[.29487 

8" 

1.08862 

8" 

1.11049 

8" 

.13202 

157' 

.29963 

9" 

1.08907 

9" 

1.11094 

9" 

.13246 

158' 

.30437 

10" 

1.08953 

10" 

1.11139 

10" 

.13290 

159' 

.30910 

11" 

1.08999 

11" 

1.11184 

11" 

1.13335 

160' 

.31382 

116' 

1.09045 

120' 

1.11230 

124' 

L.  13379 

161' 

.31853 

326    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 


Depth 

Ft.   In. 

Ratio 

162' 

1.32322 

163' 

1.32788 

164' 

1.33254 

165' 

1.33718 

166' 

1.34180 

167' 

1.34643 

168' 

1.35104 

169' 

1.35563 

170' 

1.36020 

171' 

1.36477 

Depth 
Ft.   In. 

172' 
173' 
174' 
175' 
176' 
177' 
178' 
179' 
180' 
181' 


Ratio 

.36932 

.37386 

.37838 

.38289 

.38739 

.39188 

.39636 

1.40082 

1.40527 

1.40971 


Depth 
Ft.   In. 

182' 
183' 
184' 
185' 
186' 
187' 
188' 
189' 
190' 
191' 


Depth 

Ratio 

Ft.  In. 

.41414 

192' 

.41855 

193' 

.42295 

194' 

.42734 

195' 

.43172 

196' 

.43609 

197' 

.44045 

198' 

.44479 

199' 

.44912 

200' 

1.45344 

Ratio 

1.45776 
1.46206 
1.46635 
1.47062 
1.47489 
1.47915 
1.48340 
1.48763 
1.49186 


Example:  To  find  the  value  of  a  lot  110  feet  7  inches  deep,  a  standard  lot 
being  worth  $75,000,  multiply  $75,000  by  1.06  =  $79,500. 

For  depths  of  more  than  200  feet  or  where  greater  accuracy  is  desired  than 
three  places  of  decimals,  use  the  formula,  in  which  Y=  the  proportion  of  value 
of  lot  in  question  to  value  of  standard  lot,  and  X=  the  proportion  of  depth  of 
lot  in  question  to  depth  of  standard  lot. 


No.  85 

AGREEMENT  BETWEEN  OWNER  AND  ARCHITECT 

ON  THE  FEE  PLUS  COST  SYSTEM 

Copyright  1917  by  the  American  Institute  of  Architects, 

The  Octagon,  Washington,  D.  C. 

THIS  AGREEMENT  made  the  day  of in  the  year  Nineteen 

Hundred  and by  and  between hereinafter  called 

the  Owner,  and hereinafter  called  the  Architect,  WITNESSETH, 

that  whereas  the  Owner  intends  to  erect   (Add  here  brief  description  of  scope 
and  manner  of  execution  of  work.)    


NOW,  THEREFORE,  the  Owner  and  the  Architect,  for  the  considerations 
hereinafter  named,  agree  as  follows: 

The  Architect  agrees  to  perform  for  the  above-named  work,  professional 
services  as  stated  in  Article  1  of  the  "Conditions  of  Agreement  between  Owner 
and  Architect"  hereinafter  set  forth. 

The  Owner  agrees  to  pay  the  Architect  the  sum  of dollars  ($ ) 

as  his  fee,  of  which dollars  ($....)  is  to  be  paid  in equal  install* 

ments  monthly,  beginning  ,  the  balance  to  be  paid  on  issuance  of 

final  certificate;  and  to  reimburse  the  Architect  monthly  all  costs  incurred  by 
him  in  the  performance  of  his  duties  hereunder  as  more  fully  set  forth  in  the 
said  "Conditions." 


The  parties  hereto  further  agree  to  the  following: 


APPENDIX  327 

CONDITIONS  OF  AGREEMENT  BETWEEN  OWNER  AND  ARCHITECT. 

Article  I.  The  Architect's  Services. — The  Architect's  professional  services 
consist  of  the  necessary  conferences,  the  preparation  of  preliminary  studies, 
working  drawings,  specifications,  large-scale  and  full-size  detail  drawings; 
the  drafting  of  forms  of  proposals  and  contracts;  the  issuance  of  certificates  of 
payment;  the  keeping  of  accounts,  the  general  administration  of  the  business 
and  supervision  of  the  work. 

2.  The  Architect's  Fee. — The  fee  payable  by  the  Owner  to  the  Architect  for 
his  personal  professional  services  shall  be  as  named  elsewhere  in  this  Agree- 
ment. 

In  case  of  the  abandonment  or  suspension  of  the  work  or  of  any  part  or  parts 
thereof,  the  Architect  is  to  be  paid  in  proportion  to  the  services  rendered  on 
account  of  it  up  to  the  time  of  its  abandonment  or  suspension,  such  proportion 
being  20%  upon  completion  of  preliminary  sketches  and  60%  upon  completion 
of  working  drawings  and  specifications. 

If  the  scope  of  the  work  or  the  manner  of  its  execution  is  materially  changed 
subsequent  to  the  signing  of  the  Agreement  the  fee  shall  be  adjusted  to  fit  the 
new  conditions. 

If  additional  personal  service  of  the  Architect  is  made  necessary  by  the  de- 
linquency or  insolvency  of  either  the  Owner  or  the  Contractor,  or  as  a  result 
of  damage  by  fire,  he  shall  be  equitably  paid  by  the  Owner  for  such  extra 
service. 

j.  The  Architect's  Costs. — The  Architect  shall  maintain  an  efficient  and  ac- 
curate cost-keeping  system  as  to  all  costs  incurred  by  him,  in  connection  with 
the  subject  of  this  agreement,  and  his  accounts,  at  all  reasonable  times,  shall 
be  open  to  the  inspection  of  the  Owner  or  his  authorized  representatives. 

The  costs  referred  to  in  this  Article  comprise  the  following  items: 

(a)  The   sums   paid   for   drafting,   including  verification   of  shop   drawings, 
for  specification  writing  and  for  supervision  of  the  work. 

(b)  The   sums   paid  to   structural,   mechanical,  electrical,   sanitary  or   other 
engineers. 

(c)  The  sums  paid  for  incidental  expenses  such  as  costs  of  transportation 
or  living  incurred  by  the  Architect  or  his  assistants  while  traveling  in  discharge 
of  duties  connected  with  the  work,  costs  of  reproducing  drawings,  printing  or 
mimeographing  the   specifications,   models,   telegrams,   long  distance   telephone 
calls,  legal  advice,  expressage,  etc. 

(d)  A  proportion  of  the  general  expenses  of  the  Architect's  office,  commonly 
called  "Overhead,"  representing  items  that  cannot  be  apportioned  in  detail  to 
this  work,  such  as  rent,   light,   heat,   stenographer's  services,  postage,  drafting 
materials,  telephone,  accounting,  business  administration,  etc. 

It  is  agreed  that  the  charge  for  such  general  expenses  shall  be  ....  per  cent 
of  item  (a)  of  this  article. 

4.  Payments. — On  or  about  the  first  day  of  each  month  the  Architect  shall 
present  to  the  Owner  a  detailed  statement  of  the  payment  due  on  account  of 
the  fee   and  the  costs  referred  to  in  Article  3   and  the   Owner  shall   pay  the 
Architect  the  amount  thereof. 

5.  The  Owner's  Decisions. — The  Owner  shall  give  thorough  consideration  to 
all  sketches,  drawings,  specifications,  proposals,  contracts  and  other  documents 
laid  before  him  by  the  Architect  and,  whenever  prompt  action  is  necessary,  he 
shall   inform  the  Architect  of  his  decisions  in  such  reasonable  time   as  not  to 
delay  the  work  of  the  Architect  nor  to  prevent  him  from  giving  drawings  or 
instructions  to  Contractors  in  due  season. 

6.  Survey,  Borings  and  Tests. — The  Owner  shall  furnish  the  Architect  with 
a  complete  and  accurate  survey  of  the  building  site,  giving  the  grades  and  lines 
of  streets,  pavements  and  adjoining  properties;   the  rights,   restrictions,  boun- 


328    REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

daries  and  contours  of  the  building  site,  and  full  information  as  to  sewer,  water, 
gas  and  electrical  service.  The  Owner  is  to  pay  for  test  borings  or  pits  and 
for  chemical,  mechanical  or  other  tests  when  required. 

7.  Supervision    of   the   Work. — The    Architect    will    endeavor    to    guard   the 
Owner  against  defects  and  deficiencies  in  the  work  of  contractors,  but  he  does 
not  guarantee  the  performance  of  their  contracts.     The  supervision  of  an  Ar- 
chitect is  to  be  distinguished  from  the  continuous  personal  superintendence  to 
be  obtained  by  the  employment  of  a  clerk-of-the-works. 

When  authorized  by  the  Owner,  a  clerk-of-the-works,  acceptable  to  both 
Owner  and  Architect,  shall  be  engaged  by  the  Architect  at  a  salary  satisfactory 
to  the  Owner  and  paid  by  the  Owner. 

8.  Preliminary  Estimates. — When  requested  to  do  so,  the  Architect  will  make 
or  procure  preliminary  estimates  on  the  cost  of  the  work  and  he  will  endeavor 
to  keep  the  actual  cost  of  the  work  as  low  as  may  be  consistent  with  the  purpose 
of  the  building  and  with  proper  workmanship  and  material,  but  no  such  esti- 
mate can  be  regarded  as  other  than  an  approximation. 

g.  Ownership  of  Documents. — Drawings  and  specifications  as  instruments  of 
service  are  the  property  of  the  Architect  whether  the  work  for  which  they  are 
made  be  executed  or  not. 

10.  Successors  and  Assignments. — The  Owner  and  the  Architect,  each  binds 
himself,  his  successors,  executors,  administrators,  and  assigns  to  the  other  party 
to  this  agreement,  and  to  the  successors,  executors,  administrators,  and  assigns 
of  such  other  party  in  respect  of  all  the  covenants  of  this  Agreement. 

The  Architect  shall  have  the  right  to  join  with  him  in  the  performance  of 
this  agreement,  any  architect  or  architects  with  whom  he  may  in  good  faith 
enter  into  partnership  relations.  In  case  of  the  death  or  disability  of  one  or 
more  partners,  the  rights  and  duties  of  the  Architect,  if  a  firm,  shall  devolve 
upon  the  remaining  partner  or  partners  or  upon  such  firm  as  may  be  established 
by  him  or  them,  and  he,  they  or  it,  shall  be  recognized  as  the  "successor"  of 
the  Architect,  and  so  on  until  the  service  covered  by  the  agreement  has  been 
performed.  The  Owner  shall  have  the  same  rights,  but  in  his  case  no  limitation 
as  to  the  vocation  of  those  admitted  to  partnership  is  imposed. 

Except  as  above,  neither  the  Owner  nor  the  Architect  shall  assign,  sublet 
or  transfer  his  interest  in  this  agreement  without  the  written  consent  of  the 
other. 

11.  Arbitration. — All  questions  in  dispute  under  this  agreement  shall  be  sub- 
mitted to  arbitration  at  the  choice  of  either  party. 

No  one  shall  be  nominated  or  act  as  an  arbitrator  who  is  in  any  way  finan- 
cially interested  in  this  contract  or  in  the  business  affairs  of  either  party. 

The  general  procedure  shall  conform  to  the  laws  of  the  State  in  which  the 
work  is  to  be  erected.  Unless  otherwise  provided  by  such  laws,  the  parties 
may  agree  upon  one  arbitrator;  otherwise  there  shall  be  three,  one  named  in 
writing  by  each  party  and  the  third  chosen  by  these  two  arbitrators,  or  if  they 
fail  to  select  a  third  within  ten  days,  then  he  shall  be  chosen  by  the  presiding 
officer  of  the  Bar  Association  nearest  to  the  location  of  the  work.  Should  the 
party  demanding  arbitration  fail  to  name  an  arbitrator  within  ten  days  of  his 
demand,  his  right  to  arbitration  shall  lapse.  Should  the  other  party  fail  to 
choose  an  arbitrator  within  said  ten  days,  then  such  presiding  officer  shall 
appoint  such  arbitrator.  Should  either  party  refuse  or  neglect  to  supply  the 
arbitrators  with  any  papers  or  information  demanded  in  writing,  the  arbitrators 
are  empowered  by  both  parties  to  proceed  ex  parte. 

The  arbitrators  shall  act  with  promptness.  If  there  be  one  arbitrator  his 
decision  shall  be  binding;  if  three,  the  decision  of  any  two  shall  be  binding. 
Such  decision  shall  be  a  condition  precedent  to  any  right  of  legal  action,  and 
wherever  permitted  by  law  it  may  be  filed  in  Court  to  carry  it  into  effect. 


APPENDIX  329 

The  arbitrators  shall  fix  their  own  compensation,  unless  otherwise  provided 
by  agreement,  and  shall  assess  the  costs  and  charges  of  the  arbitration  upon 
either  or  both  parties. 

The  award  of  the  arbitrators  must  be  in  writing  and,  if  in  writing,  it  shall 
not  be  open  to  objection  on  account  of  the  form  of  the  proceedings  or  the  award, 
unless  otherwise  provided  by  the  laws  of  the  State  in  which  the  work  is  to  be 
erected. 

The  Owner  and  the  Architect  hereby  agree  to  the  full  performance  of  the 
covenants  contained  herein. 

IN  WITNESS  WHEREOF  they  have  executed  this  agreement,  the  day  and 
year  first  above  written. 


No.  86 

AGREEMENT  BETWEEN  OWNER  AND 
CONTRACTOR 


Adopted  and  Recommended  for  General  Use  by  the  American  Institute  of 
Architects  and  the   National  Association  of  Builders. 


Copyrighted  1905  by  the  American  Institute  of  Architects,  Washington,  D.  C. 


Revised,  1907 

THIS  AGREEMENT,  made  the  day  of in  the  year  one 

thousand,  nine  hundred  and  by  and  between  party  of  the  first 

part  (hereinafter  designated  the  Contractor..),  and  party  of  the 

second  part  (hereinafter  designated  the  Owner..), 

WITNESSETH  that  the  Contractor..,  in  consideration  of  the  agreements 
herein  made  by  the  Owner..,  agree.,  with  the  said  Owner.,  as  follows: 

ARTICLE  I.  The  Contractor.,  shall  and  will  provide  all  the  materials  and 
perform  all  the  work  for  the  

as  shown  on  the  drawings  and  described  in  the  specifications  prepared  by 

Architect,  which  drawings  and  specifications  are  identified  by  the 

signatures  of  the  parties  hereto,  and  become  hereby  a  part  of  this  contract. 

ART.  II.  It  is  understood  and  agreed  by  and  between  the  parties  hereto 
that  the  work  included  in  this  contract  is  to  be  done  under  the  direction  of  the 
said  Architect,  and  that  his  decision  as  to  the  true  construction  and  meaning 
of  the  drawings  and  specifications  shall  be  final.  It  is  also  understood  and 
agreed  by  and  between  the  parties  hereto  that  such  additional  drawings  and 
explanations  as  may  be  necessary  to  detail  and  illustrate  the  work  to  be  done 
are  to  be  furnished  by  said  Architect,  and  they  agree  to  conform  to  and  abide 
by  the  same  so  far  as  they  may  be  consistent  with  the  purpose  and  intent  of 
the  original  drawings  and  specifications  referred  to  in  Art.  1. 

It  is  further  understood  and  agreed  by  the  parties  hereto  that  any  and  all 
drawings  and  specifications  prepared  for  the  purposes  of  this  contract  by  the 


330   REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

said  Architect  are  and  remain  his  property,  and  that  all  charges  for  the  use 
of  the  same,  and  for  the  services  of  said  Architect,  are  to  be  paid  by  the  said 
Owner. .. 

ART.  III.  No  alterations  shall  be  made  in  the  work  except  upon  written 
order  of  the  Architect;  the  amount  to  be  paid  by  the  Owner.,  or  allowed  bv 
the  Contractor. .  by  virtue  of  such  alterations  to  be  stated  in  said  order.  Should 
the  Owner.,  and  Contractor.,  not  agree  as  to  amount  to  be  paid  or  allowed, 
the  work  shall  go  on  under  the  order  required  above,  and  in  case  of  failure  to 
agree,  the  determination  of  said  amount  shall  be  referred  to  arbitration,  as 
provided  for  in  Art.  XII  of  this  contract. 

ART.  IV.  The  Contractor  shall  provide  sufficient,  safe  and  proper  facilities 
at  all  times  for  the  inspection  of  the  work  by  the  Architect  or  his  authorized 
representatives;  shall,  within  twenty-four  hours  after  receiving  written  notice 
from  the  Architect  to  that  effect,  proceed  to  remove  from  the  grounds  or  build- 
ings all  materials  condemned  by  him,  whether  worked  or  unworked,  and  to 
take  down  all  portions  of  the  work  which  the  Architect  shall  by  like  written 
notice  condemn  as  unsound  or  improper,  or  as  in  any  way  failing  to  conform 
to  the  drawings  and  specifications,  and  shall  make  good  all  work  damaged  or 
destroyed  thereby. 

ART.  V.  Should  the  Contractor.,  at  any  time  refuse  or  neglect  to  supply  a 
sufficiency  of  properly  skilled  workmen,  or  of  materials  of  the  proper  quality 
or  fail  in  any  respect  to  prosecute  the  work  with  promptness  and  diligence,  or 
fail  in  the  performance  of  any  of  the  agreements  herein  contained,  such  re- 
fusal, neglect  or  failure  being  certified  by  the  Architect,  the  Owner.,  shall  be 
at  liberty,  after  three  days  written  notice  to  the  Contractor..,  to  provide  any 
such  labor  or  materials,  and  to  deduct  the  cost  thereof  from  any  money  then 
due  or  thereafter  to  become  due  to  the  Contractor.,  under  this  contract;  and  if 
the  Architect  shall  certify  that  such  refusal,  neglect  or  failure  is  sufficient 
ground  for  such  action,  the  Owner.,  shall  also  be  at  liberty  to  terminate  the 
employment  of  the  Contractor.,  for  the  said  work  and  to  enter  upon  the  prem- 
ises and  take  possession,  for  the  purpose  of  completing  the  work  included  under 
this  contract,  of  all  materials,  tools  and  appliances  thereon,  and  to  employ 
any  other  person  or  persons  to  finish  the  work,  and  to  provide  the  materials 
therefor;  and  in  case  of  such  discontinuance  of  the  employment  of  the  Con- 
tractor., shall  not  be  entitled  to  receive  any  further  payment  under  this  con- 
tract until  the  said  work  shall  be  wholly  finished,  at  which  time,  if  the  unpaid 
balance  of  the  amount  to  be  paid  under  this  contract  shall  exceed  the  expense 
incurred  by  the  Owner.,  in  finishing  the  work,  such  excess  shall  be  paid  by  the 
Owner.,  to  the  Contractor..;  but  if  such  expense  shall  exceed  such  unpaid 
balance,  the  Contractor.,  shall  pay  the  difference  to  the  Owner. ..  The  expense 
incurred  by  the  Owner.,  as  herein  provided,  either  for  furnishing  materials  or 
for  finishing  the  work,  and  any  damage  incurred  through  such  default,  shall  be 
audited  and  certified  by  the  Architect,  whose  certificate  thereof  shall  be  conclu- 
sive upon  the  parties. 

ART.  VI.  The  Contractor.,  shall  complete  the  several  portions,  and  the 
whole  of  the  work  comprehended  in  this  Agreement  by  and  at  the  time  or  times 
hereinafter  stated,  to  wit: 


ART.  VII.  Should  the  Contractor.,  be  delayed  in  the  prosecution  or  comple- 
tion of  the  work  by  the  act,  neglect  or  default  of  the  Owner. .,  of  the  Architect, 
or  of  any  other  contractor.,  employed  by  the  Owner.,  upon  the  work,  or  by 

any  damage  caused  by  fire  or  other  casualty  for  which  the  Contractor 

not  responsible,  or  by  combined  action  of  workmen   in  no  wise  caused  by  or 
resulting  from  default  or  collusion  on  the  part  of  the  Contractor..,  then  the 


APPENDIX  331 

time  herein  fixed  for  the  completion  of  the  work  shall  be  extended  for  a  period 
equivalent  to  the  time  lost  by  reason  of  any  or  all  the  causes  aforesaid,  which 
extended  period  shall  be  determined  and  fixed  by  the  Architect;  but  no  such 
allowance  shall  be  made  unless  a  claim  therefor  is  presented  in  writing  to 
the  Architect  within  forty-eight  hours  of  the  occurrence  of  such  delay. 

ART.  VIII.  The  Owner.,  agree.,  to  provide  all  labor  and  materials  essen- 
tial to  the  conduct  of  this  work  not  included  in  this  contract  in  such  manner 
as  not  to  delay  its  progress,  and  in  the  event  of  failure  so  to  do,  thereby  causing 

loss  to  the  Contractor..,  agree  that will  reimburse  the  Contractor.,  for 

such  loss;  and  the  Contractor.,  agree.,  that  if shall  delay  the  progress 

of  the  work  so  as  to  cause  loss  for  which  the  Owner.,  shall  become  liable, 

then  shall  reimburse  the  Owner.,  for  such  loss.  Should  the  Owner.. 

and  Contractor.,  fail  to  agree  as  to  the  amount  of  loss  comprehended  in  this 
Article,  the  determination  of  the  amount  shall  be  referred  to  arbitration  as 
provided  in  Art.  XII  of  this  contract. 

ART.  IX.  It  is  hereby  mutually  agreed  between  the  parties  hereto  that  the 
sum  to  be  paid  by  the  Owner.,  to  the  Contractor.,  for  said  work  and  materials 
shall  be  

subject  to  additions  and  deductions  as  hereinbefore  provided,  and  that  such  sum 
shall  be  paid  by  the  Owner.,  to  the  Contractor..,  in  current  funds,  and  only 
upon  certificates  of  the  Architect,  as  follows: 


The  final  payment  shall  be  made  within days  after  the  completion  of 

the  work  included  in  this  contract,  and  all  payments  shall  be  due  when  certifi- 
cates for  the  same  are  issued. 

If  at  any  time  there  shall  be  evidence  of  any  lien  or  claim  for  which,  if 
established,  the  Owner.,  of  the  said  premises  might  become  liable,  and  which 
is  chargeable  to  the  Contractor. .,  the  Owner. .  shall  have  the  right  to  retain  out 
of  any  payment  then  due  or  thereafter  to  become  due  an  amount  sufficient  to  comj- 

pletely  indemnify  against  such  lien  or  claim.  Should  there  prove 

to  be  any  such  claim  after  all  payments  are  made,  the  Contractor. .  shall  refund 
to  the  Owner.,  all  moneys  that  the  latter  may  be  compelled  to  pay  in  dis- 
charging any  lien  on  said  premises  made  obligatory  in  consequence  of  the 
Contractor.,  default. 

ART.  X.  It  is  further  mutually  agreed  between  the  parties  hereto  that  no 
certificate  given  or  payment  made  under  this  contract,  except  the  final  certificate 
or  final  payment,  shall  be  conclusive  evidence  of  the  performance  of  this  con- 
tract, either  wholly  or  in  part,  and  that  no  payment  shall  be  construed  to  be 
an  acceptance  of  defective  work  or  improper  materials. 

ART.  XI.  The  Owner.,  shall  during  the  progress  of  the  work  maintain  in- 
surance on  the  same  against  loss  or  damage  by  fire,  the  policies  to 

cover  all  work  incorporated  in  the  building,  and  all  materials  for  the  same  in 
or  about  the  premises,  and  to  be  made  payable  to  the  parties  hereto,  as  their 
interest  may  appear. 

ART.  XII.  In  case  the  Owner.,  and  Contractor.,  fail  to  agree  in  relation  to 
matters  of  payment,  allowance  of  loss  referred  to  in  Arts.  Ill  or  VIII  of  this 
contract,  or  should  either  of  them  dissent  from  the  decision  of  the  Architect 
referred  to  in  Art.  VII  of  this  contract,  which  dissent  shall  have  been  filed  in 
writing  with  the  Architect  within  ten  days  of  the  announcement  of  such  de- 
cision, then  the  matter  shall  be  referred  to  a  Board  of  Arbitration  to  consist 
of  one  person  selected  by  the  Owner..,  and  one  person  selected  by  the  Con- 


332     REAL  ESTATE  PRINCIPLES  AND  PRACTISES 

tractor..,  these  two  to  select  a  third.  The  decision  of  any  two  of  this  Board 
shall  be  final  and  binding  on  both  parties  hereto.  Each  party  hereto  shall  pay 
one-half  of  the  expense  of  such  reference. 

The  said  parties  for  themselves,  their  heirs,  successors,  executors,  adminis- 
trators and  assigns,  do  hereby  agree  to  the  full  performance  of  the  covenants 
herein  contained. 

IN  WITNESS  WHEREOF,  the  parties  to  these  presents  have  hereunto  set 
their  hands  and  seals  the  day  and  year  first  above  written. 

In  presence  of 

No.  87 

TORRENS  LAW— REGISTRAR'S  CERTIFICATE 
OF  TITLE— NEW  YORK 

No First  registered 

CERTIFICATE  OF  TITLE 
(First  Certificate)   or    (Transfer  from  No )    

State  of  New  York 
County ss. : 

of  (residence,  and  if  a  minor  give  his  age;  if  under  other  disability,  state  the 
nature  of  the  disability)  ;  married  to  (name  of  husband  or  wife,  or  if  not 
married,  say  not  married)  ;  is  the  owner  of  an  estate  in  fee  simple  (or  as  the 
case  may  be)  in  the  following  land  (here  describe  the  premises)  subject  to 
the  estates,  easements,  incumbrances  and  charges  hereunder  noted.  (In  case  of 
trust,  condition  or  limitation,  say  "in  trust"  or  "upon  condition"  or  "with 
limitation,"  as  the  case  may  be.) 

WITNESS  my  hand  and  seal  this  (date) 


(Seal) 


Registrar. 


MEMORIALS 


of  estates,  easements  and  charges  on  the  land  described  in  the  above  certificate 
of  title. 


Document 
number 


Kind 


Running 
in  favor  of 


Terms 


Date  of 


Signature 
of 


Registration       Regisfrar 


INDEX  TO  APPENDICES 

TITLE                                                                                                                      NUMBER  PAGE 

Abstract  of  Title 58  282 

Acknowledgment,  before  a  Consular  Officer 27  242 

Acknowledgment,  before  a  Foreign  Commissioner 28  243 

Acknowledgment,  by  a  Corporation 16  239 

Acknowledgment,  by  Attorney  In  Fact 20  240 

Acknowledgment,  by  Firm 18  240 

Acknowledgment,  by  Husband  and  Wife 19  240 

Acknowledgment,  by  Individual        IS  239 

Acknowledgment,  by  Subscribing  Witness 17  239 

California 24  242 

Illinois 25  242 

Massachusetts 23  241 

New  Jersey 21  241 

Ohio 22  241 

Pennsylvania 26  242 

Advertising,  Auction 244 

Affidavit  of  Title 62  286 

Agency  Complaint  Form 80  315 

Agency  Contract 79  314 

Agency  Order  Form 81  316 

Agreement  Guaranteeing  Payment  of  Rent 70  297 

Agreement,  Subordination 49  272 

Appraisal,  Form  of 82  316 

Architect,  Agreement  With  Owner 85  326 

Assignment  of  Mortgage 46  270 

Auction  Advertising 244 

Auction,  Terms  of  Sale 67 

Bill  of  Sale 65  288 

Bill  of  Sale,  Conditional 2  216 

Bond,  New  York 83 

Broker's  Commission  Schedules,  Boston 74  303 

Brooklyn,    N.   Y 72  298 

Cook  County,  Illinois 73  299 

New  York  City 71  297 

Philadelphia 75  306 

Broker's  Listing  Card 78  313 

Brokerage  Agreement  and  Listing  Card,  Cook  County,  Illinois  .     .  76  309 

Builder,  Contract  With  Owner 86  329 

Building,  Certificate  of  Completion 56  280 

Building  Loan  Agreement 54  276 

Building  Loan,  Contract  of  Sale  With 14  235 

Building  Loan  Mortgage 55  278 

Certificate  of  Completion  of  Building 56  280 

Certificate  of  County  Clerk 29  243 

Chattel  Mortgage 3  219 

Closing  of  Title,  Purchaser's  Data 61  285 

Seller's  Data 60  284 

Statement  of ,.     .     .     .  66  289 

333 


334  REAL  ESTATE  PRINCIPLES  AND  PRACTICES 

TITLE  NUMBER 

Conditional  Bill  of  Sale 2 

Contract  of  Sale,  California 5 

Cook  County,  111 11 

Illinois 10 

Massachusetts 8 

New  York 

Ohio 9 

Pennsylvania 6 

Facts  to  Ascertain  Before  Drawing 4 

Contract  of  Sale  With  Building  Loan 14 

Contract  for  Exchange,  New  York 

Contract,    Installment   House 12 

Installment   Lot 13 

Contractor,  Contract  With  Owner 86 

County  Clerk's  Certificate 29 

Covenants,  Restrictive .  36 

Davies  Rule  for  Valuation 84 

Deed,  California 31 

Massachusetts 33 

Statute  Form 43 

New  Jersey 30 

New  York 

Ohio 35 

Pennsylvania 32 

of  Trust,  Illinois 40 

Default  Clause,  Junior  Mortgage 53 

Description,  by  Lot  Number 

by  Metes  and  Bounds 

by  Monuments 

Irregular  Plot   

Estoppel  Certificate,  Mortgagee 64  287 

Owner 63  287 

Extension  of  Mortgage 48  271 

Gilsey  Form  Lease 68  290 

Hoffman  Rule  for  Valuation 83  317 

Installment  House  Contract 12  229 

Installment   Lot   Contract 13  231 

Land,  Rules  for  Measuring 57a 

Lease,  Common  Form 67 

Lease,  Gilsey  Form 68 

Lease,  Long  Form 69 

Lien,  Notice  of  Mechanic's 1 

Measurement  Tables,  Linear,  etc 57 

Measuring  Land,  Rules  for 57a 

Mechanic's  Lien,  Notice  of      . 1 

Mortgage  Application  Forms 77 

Mortgage,  Assignment  of 46 


INDEX  TO  APPENDICES  335 

TITLE                                                                                                                             NUMBER  PAGE 

Mortgage,  Building  Loan 55  278 

Mortgage,  California 38  255 

Illinois 41  262 

Massachusetts 44  265 

Statute  Form 43  264 

New    Jersey 37  254 

New    York 90 

Old    Form 45  267 

Ohio        42  263 

Pennsylvania 39  257 

Mortgage,  Chattel 3  219 

Mortgage,  Extension  of 48  271 

Mortgage,  Instalment  Clause 86 

Purchase  Money  Clause 92 

Subordination  and  Default  Clauses 53  275 

Mortgage,  Release  of  Part  of  Premises 50  273 

Satisfaction  of .47  271 

Subordination  Agreement 49  272 

Mortgagee's  Estoppel  Certificate 64  287 

Notice  of  Mechanic's  Lien 1  215 

Option  to  Purchase,  Massachusetts 7  223 

Owner's  Estoppel  Certificate 63  287 

Purchase  Money  Clause  for  Mortgage 92 

Purchaser's  Data  on  Closing  of  Title 61  285 

Release     Clause 51  274 

Release  Clause 52  275 

Release  of  Part  of  Mortgaged  Premises 50  273 

Rent,  Guarantee  Agreement 70  297 

Restrictive  Covenants 36  252 

Sale,  Bill  of 65  288 

Sale,  Terms  of,  at  Auction 67 

Satisfaction  of  Mortgage 47  271 

Seller's  Data  on  Closing  of  Title 60  284 

Statement  of  Closing  Title 66  289 

Subordination  Agreement 49  272 

Subordination  Clause,  Junior  Mortgage 53  275 

Survey,  Specimen 59  284 

Tables,  Linear,  etc 57  280 

Terms  of  Sale,  Auction 67 

Title,  Abstract   of 58  282 

Title,  Affidavit  of 62  286 

Title,  Statement  of  Closing 66  289 

Torrens  Law,  Registrar's  Certificate  of  Title 87  332 

Trust  Deed,  Illinois       .           40  259 

Valuation,  Davies  Rule 84  318 

Hoffman  Rule 83  317 


INDEX 


Abstract  of  title,  107 
Accounting  by  property  manager,  156 
Acknowledgment  of  deed,  79 
Acknowledgment    of    indebtedness    on 

bond,  84 

Acknowledgment  on  contract  of  sale,  59 
Acknowledgments,  who  may  take,  105 
Active  real  estate  business,  2 

divisions  of,  3 
Adjustments  at  time  of  closing,  117 

computation  of,  119 

on  exchanges  of  property,  120 
Adverse  possession,  title  by,  104 
Advertising  auction  sales,  71 
Agency,   active  branch  of  real  estate 
business,  3,  5 

divisions  of,  5 

termination   of,    150 
Agents,  compensation  of,  5 

relation  with  tenants,  157 

relation  with  owner,  157 
Alodial  system  of  land  ownership,  8 
Alteration,  branch  of  real  estate,  4 
Amortization  of  loans,  181 
Appraisal  of  property  by  tax  assessors, 

25 
Appraiser,  work  of,  in  condemnation 

proceedings,   171 
Appraising  land  values,  158 
Appropriation    and    tax    summary    of 

New  York,  30,  31,  32,  33 
Appurtenances,  recital  of  in  deed,  77 
Architect,  compensation  of,  195 

relation  to  real  estate,  193 

services  of,  195 

work  of,  193 
Assessed  valuations,  25 

reductions  in,  27 

Assessment  rolls,  date  made  up,  29 
Assessments,  24 

as  liens,   14,  35 

covenant    in    mortgage    to    pay,    93 

definition  of,  34 

disposition  of  at  auction  sale,  69 

how  levied,  34 
Assignment  of  lease,  132 


Assuming  a  mortgage,  52 
Attachments,   19 
Auction  sales,  65 

conduct  of,  66 

disposition  of  taxes,  assessments  and 
water  rates,  69 

fraudulent  bidding  at,  69 

involuntary,  65 

notice  of,  66 

price  as  an  indication  of  value  at, 
162 

publicity  for,  71 

terms  of,  67 

to  enforce  liens,  36 

voluntary,  70 

B 

Bargain  and  sale  deed,  72,  80 
Benefit  parcels,  35 
Bidding  at  auction  sale,  69,  70 
Bond  and  mortgage,  purpose  of,  83 
Bond,  advantages  of  obtaining,  1T2 

collateral  trust  real  estate,  190 

debenture,  191 

enforcement  of,  88 

execution  of,  88 

form  of,  83 

Prudence,  186 

repayment  in  instalments,  86 

tax  on,  89 

Borrowers  of  funds  on  mortgages,  174 
Borrowing,  why  it  pays,  175 
Broker,  authority  to  act,  143 

business  of,  140 

compensation  of,  139 

definition  of,  139 

duty  to  principal,  149 

misrepresentation  by,  150 

mortgage  loan,  141,  191 

payment  of  commission  to,  56 

qualifications  of,  139 

termination  of  employment  of,  150 
Brokerage,  5,  139 
Brokerage    statement    in    exchange    of 

real  estate,  64 

Brundage  clause  in  mortgage,  94 
Budget  of  New  York  City,  30-34 


336 


INDEX 


337 


Budget,  relation  to  taxation,  25 

Builders  as  borrowers,  174 

Building  and  permanent  loans,  4,  189 

Building  loans,  4,  188 

Building  loan  agreements,  4,  189 

Building  loan  mortgage,  96 

Buildings,  planning  of,  198 

valuation  of,  167 
Buying  and  selling  for  speculation,  4 


Care  of  property,  155 

Certiorari,  28 

Chattel  interests,  meaning  of,  9 

Chicago  plan  of  real  estate  financing, 

186 

City  or  village  tax,  25 
Clauses  in  deed,  75 
Closing  a  sale,  payments  on,  51 
Closing  date  and  place,  specification  in 

contract,   54 

Closing  of  exchanges  of  property,  120 
Closing  sales  of  leaseholds,  120 
Closing  title,  114 

delivery  of  instruments  at,  117 
Collateral  trust  real  estate  bonds,  190 
Commission,  deferring  or  waiving  of, 
147 

meaning  of,  5,  139 

on  exchanges  of  property,  14 

on   loans,   148 

on  rentals,  148 

payment   of,    56,    139 

rates  of,   150 

rules  as  to  earning,  146 

when  it  is  earned,  145 

who  pays  it,  147 
Compensation  of  agents,  5 

of  architect,   195 

of  brokers,  139 

of  real  estate  manager,  157 
Competent  parties,  38 
Condemnation  proceedings,  34 

work  of  appraiser  in,  171 
Conditional  bill  of  sale,  21 
Consequential  damages,   173 
Consideration  for  sale,  39,  73 
Contract,  acknowledgment  on,  59 

contents  of,  42 

description  of  property  in,  44 

elements  of,  38 

execution  of,  58 

financial  statement  in,  50 

for  performing  work  or  furnishing 
material,  198 


for  exchange  of  reaT  estate,  61 

for  purchase  and  sale,  38 

non-performance  of,  60 
Contractors,  payment  of,  197 

form  of  contract,  198 
Corporation  franchise  tax,  21 
Corporation,  sale  of  real  estate  by,  39 

signing  of  deed  by,  78 
Cost  plus  contracts,   197 
Costs  of  building,  170 
County  tax,  24 

Covenants  and  restrictions,  21 
Covenants,    against  grantor's   acts,   80 

against  encumbrances,  81 

given  by  landlord,  137 

in  deed,  57 

in  mortgage,  92 

of  further  assurance,  82 

of  quiet  enjoyment,  81 

of  seizin,  81 

of  warranty,  82 

with  bargain  and  sale  deed,  80 
Curtesy,  12 


Damage  parcels,  35 

Dating  of  contracts,  42 

Dating  of  deeds,  73 

Death   of   parties   pending   closing   of 

sale,  effect  of,  58 
Debenture  bonds,  191 
Deed,  acknowledgment  of,  79 

appurtenance  recitals  in,  77 

clauses  in,  73 

definition  of,  72 

description  of  property  in,  75 

enumeration  of  encumbrances  in,  78 

execution  of,  57 

execution  of,  by  corporation,  78 

form  of,  56,  72 

habendum  clause  in,  77 

quit  claim,  79 

restrictive  covenants  in,  78 

signature  on,  78 

use  of  seal  on,  79 

witness  to,  79 

Default  clause  in  mortgage,  87 
Default,    remedies    of    mortgagee    in 

case  of,  98 

Defeasance  clause  in  mortgage,  92 
Delivery  in  escrow,  114 
Deposit  as  a  lien,  58 
Deposit,  payment  of,  50 
Descent,  passing  of  title  by,  12 


338 


INDEX 


Description,  by  lot  number,  45 
by  metes  and  bounds,  45 
by  street  number,  45 
by  monuments,  47 
of  farm  lands,  47 
of  improved  property,  48 
of  property  in  contract,  44 
of  property  in  deed,  75 
selection  of  form  of,  48 
when  encroachments  exist,  48 

Discharge  of  judgments,  19 

Discharge  of  mechanic's  lien,  17 
by  order  of  the  Court,  18 
by  payment,  18 

Dispossess  proceedings,  128 
when  brought,  127 

Dower  right,  11 


Exchange    of    real    estat%v    brokerage 

statement  in,  64 
adjustment  upon,  120 
closing  of,  120 
contracts  for,  61 
commissions  on,  148 
financial  statement  in,  64 
form  of  contract  for,  63 
Execution  of  judgment,  18 
of  bond,  88 
of  contract,  58 
of  deed,  57 

Expenses  of  executing,  acknowledging 
and  delivering  deed,  payment 
of,  57 

Expenses  of  drawing  and  recording 
purchase  money  mortgage,  pay- 
ment of,  53 


Easements,  21 

Elements  of  a  valid  contract,  38 
Emergency  rent  laws,  129 
Eminent  domain,  8,  9,  172 
Encroachments,  by  others,  49,  113 

on  others,  48,   112 
Encumbrances  assumed,  115 
Encumbrances,  covenants  against,  81 

enumeration  of,  78 

not  liens,  21 

to  be  removed,  116 

provision  regarding,  in  contract,  50 
Enforcement  of  bond,  88 

of  lien  of  taxes,  36 

of  mechanic's  lien,  16 
Equity  of  redemption,  meaning  of,  89 
Erection  of  buildings  for  speculation,  3 
Escheat  to  the  State,  8 
Estate  by  the  entirety,  12 
Estates,  by  entirety,  12 

curtesy,  11 

dower,  11 

fee  determinable,  10 

fee  simple,  9 

fee  upon  condition,  10 

forms  of,  9 

joint,  12 

life,  10 

meaning  of,  9 

remainders,  10 

tax  on,  20 

tenants  in  common,  12 
Estoppel  certificate,  93 
Ethics  of  real  estate  business,  1 
Examination  of  title,  106 


Farm  land,  description  of,  47 

loans  on,  186 

Farmers  as  borrowers,  174 
Federal  estate  tax,  20 
Federal  Farm  Loan  Act,  183 
Federal  Land  Banks,  185 
Fee,  form  of  estate,  9 
Fee  determinable,   10 
Fee  simple,  9 
Fee  simple  absolute,  9 
Fee  upon  condition  and  fee  determin- 
able, 10 

Feudal  system  of  land  ownership,  8 
Financial  statement  in  contract,  50 

statement  in  exchange  of  real  estate, 

64 

Fire  clause  in  lease,  132 
Fixtures,  determination  of  what  are,  7 
Foreclosure,  by  action  of  law,  98 

by  advertisement,  98 

meaning  of,  16 

of  mortgage,  98 
Forfeit  of  deposits,  51 
Franchise  of  corporation,  tax  on,  21 
Fraudulent  bidding  at  auction  sale,  69 
Full  covenant  and  warranty  deed,  80 
Further  assurance  covenant,  82 


General   liens,   14 
Granting  clause  in  deed,  75 
Ground  lease,   125 
Ground  rent,  125 
Guaranteed  mortgages,  187 
Guaranty  by  lessee,  135 


INDEX 


339 


H 

Habendum  clause  in  deed,  77 
Highway  tax,  24 
Hoffman  and  Davies  rules,  163 
Hoffman-Neil   rule,  26 
Hold-over  tenants,  124 


Improved  property,  description  of,  48 

valuation  of,  167 

Improvements  on  leased  property,  131 
Inactive  real  estate  business,  2 
Inheritance  tax,  20 
Instalment  contracts,  54 
Instalment    payment    of    principal    of 

bond,  86 

Insurance,  covenant  in  mortgage  for, 
88 

apportionment  of  premium,  55 

kinds  necessary  for  property  protec- 
tion, 156 

necessity  for,  183 

of  title,  101,  107 

Interest    on    mortgage,    provision    for 
payment  of,  85 

apportionment  of,  55 
Interest  rate,  when  usurious,  88 
Investment  branch  of  real  estate,  2 
Investments  of  other   kinds  compared 

with  mortgage  loans,  177 
Involuntary  alienation,  passing  of  title 

by,  12,  103 

Involuntary  auction  sales,  65 
Irregular  lots,  description  of,  47 


Joint  interests  in  land,  12 
Joint  stock  land  banks,  186 
Joint  tenancy,  12 
Judgment  dockets,  18 
Judgments,  18 

discharge  of,  19 

priority  of,  22 
Junior  mortgages,  clauses,  95 


Land  banks,  185 

Landlord,  covenants  by,  137 

Leases,  122 

assignment  of,  132 

fire  clause  in,  132 

form  of,  130 

mortgaging  of,  132 

of  ground,  125 


subordination  of,  137 

termination  of,    126 

terms  of,   123 
Leased  property,  improvements  on,  131 

liability  for  injury  caused  on,  135 

liens  on,  131 

repairs  on,  130 

use  of,  134 

Leaseholds,  closing  sales  of,  120 
Lenders  of  money  on  mortgages,  177 
Lessee,  guaranty  by,  135 

right  of  redemption  of,  135 
Liability  for  injury  caused  on  leased 

property,  135 
Liens,  14 

assessments  as,  35 

decedent's  debts  as,  20 

deposit  as,  58 

mechanic's,  15 

of  mortgage,  14 

of  sub-contractor,    15 

of  taxes,  24 

enforcement  of,   36 

of  taxes  and  assessments,  14 

on  leased  property,  131 

priority  of,  22 

Life  estates  and  remainders,  10 
Lifting  clause  in  mortgage,  96 
Limitations    and    restrictions    on    sale, 

8,  49 
Loans,   amortization  of,   181 

classes  of,  4 

closing  of,  120 

commissions  on,  148 

on   mortgages   classified   as   to   bor- 
rowers,  174 

on  western  farm  lands,  186 

under  Federal  Farm  Loan  Act,  183 
Loss  by  fire,  assumption  of  risk  at  time 

of  sale,  58 

Lot  number  on  map,  use  of  in  describ- 
ing property,  45 
Lot,  standard  size  of,  26 

M 

Management  of  property,  142 

a  form  of  agency,  5 

as  a  business,  151 

principles  governing,  152 
Manager  of  property,  compensation  of, 

157 

Maps,  use  of  lot  numbers  on,  45 
Marketability  of  mortgages,  178 
Mechanics'   liens,  14,  15-18 

enforcement  of,  17 


340 


INDEX 


Metes  and  bounds,  description  by,  45 
Misrepresentation  by  brokers,  150 
Mixed  property,  6 
Monuments,  description  by,  47 
More  or  less,  use  of  term  of,  48 
Mortgage,  as  investment,  177 
Brundage  clause  in,  94 
building  loan,  96 
covenants  in,  92 
default  clause  in,  87 
defeasance  clause  in,  92 
difference     between     assuming     and 

buying  subject  to,  52 
form  of,  90 
guaranteed,   187 
lien  of,   14 
lifting  clause  in,  96 
marketability  of,  178 
notice  of  satisfaction  of,  97 
on  property  at  time  of  sale,  52,  57 
of  lease,  132 
participating,   189 
pledge  of  property  by,  92 
protection  of  principal  of,  181 
provision  for  payment  of,  85 
provision  for  sale  in  one  parcel,    94 
purchase  money,  52,  92 
purpose  of,  83 
receivership  clause  in,  93 
release  clause  in,  95 
repayment  in  instalments,  87 
subordination  clause  in,  96 
trust,   97 
Mortgage  lending,  classes  of,  4 

differentiated        from        investment 

branch  of  real  estate,  4 
history  of,  89 
Mortgage  loans,  174 

closing  of,  120 

Mortgage  loan  broker,  141,  191 
Mortgagee,  remedies  of  in  case  of  de- 
fault, 98 

Mortgaging  of  lease,  132 
Municipal  ordinances,  violations  of,  57 

N 

New  York  City,  appropriation  and  tax 

summary  of,  30,  31,  32,  33 
tax  rate  for  1921,  28 

New    York    Land    Title    Registration 
Law,  203 

Non-performance  of  contracts,  60 

Notice  of  auction  sale,  66 

Notice  of  pendency,  riling  of,  98 


Operations     in     real     estate,     active 

branch,  3 

Operation  in  buildings,   3 
Ownership  of  real  property,  forms  of, 

9 

P 

Participating  mortgages,   189 
Parties  to  contract,  statement  of,  43 
Payments  at  closing  of  title,  50,  51 
Payments  of  bonds  in  instalments,  86 
Payment  of  broker's  commission,  56 
Payment  of  interest,  provision  in  bond 

and   mortgage   for,    85 
Permanent  and  building  loans,  4 
Personalty,  a  form  of  property,  6 
Personal    property,    disposition    of    in 

sale  of  real  property,  58 
Place  of  closing,  specification  of,  54 
Pledge  of  property  in  mortgage,  92 
Plottage,  meaning  of,  164 
Police  power  of  State,  8 
Policy  of  title  insurance,  contents  of, 

109 

Principal's  duty  to  broker,  149 
Priority  of  liens,  22 
Property,  divisions  of,  6 
Property  management,   151 
Prudence-Bonds,  186,  190 
Purchase  money  mortgage,  52,  92 
Purchasing  subject  to  a  mortgage,  52 


Quiet  enjoyment,  covenant  of,  81 
Quit  claim  deed,  79 


Real   estate   as  a  business,   1 

divisions  of  the  business,  2 

ethics  of,  1 

meaning  of,  7 
Real  property,  6 

divisions  of,  6 

methods  of  transferring,  102 

title  to,  12 

Receivership  clause  in  mortgage,  93 
Recording  deed,  57 
Recording  of  conveyances,  104 
Records,  examination  of,  106 
Reductions  in  assessed  valuation,  27 
Release  clause  in  mortgage,  95 
Remainders  and  life  estates,  10 
Remedies  at  non-performance  of  con- 
tract, 60 


INDEX 


341 


Rent,  122 

apportionment  of,  55 

as  a  measure  of  value,  158 

collection  of,  155 

commissions  on,  148 

computation  of  values  from,  170 

laws  in  New  York,  129 

on  gro-  nd  lease,  125 
Renting    space,    principles    governing, 

153 

Repairs  on  leased  property,  130 
Restrictions  to  be  considered  on  selling 

property,  49 
Restrictive  covenants  in  deed,  78 


Sale  at  auction,  conduct  of,  66 

Sale   in  one   parcel,   clause   providing 

for,  93 

Sale  of  real  estate  by  corporation,  39 
Satisfaction  piece,  97 
School  tax,  24 
Seal,  effect  of,  on  contract  of  sale,  59 

use  on  deed,  79 
Seizin,  covenant  of,   81 
Signing  contract  of  sale,  59 
Signing  deed,  78 

Spears  and  Company  bulletin,  152 
Specific  liens,   14 
Specifications,  195 
Speculative  buying  and  selling,  4 
Speculative  erection  of  buildings,  3 
State  taxes,  24 

Statement  of  closing  title,   119 
Statute  of  frauds,  necessity  for,  101 
Straus   plan   of    real   estate   financing, 

187 
Street  numbers,   use   of  in   describing 

property,  45 

Street  rights,  specification  of,  56 
Sub-contractor,  lien  of,  15 
Sub-lettings,  132 

Subordination  clause  in  mortgage,  96 
Survey  of  property,  necessity  for,  112 


Taxation  of  bonds,  89 

Taxation  power  of  state,  limitation  on 

ownership,  8,  9 
Taxes,  24 

apportionment  of,  55 

as  lien,  14 

covenant   in   mortgage   for   payment 
of,  93 

determining  rate  of,  25 


disposition  of  at  auction  sale,  69 

enforcement  of  lien  of,  36 

estate,  imposed  by  State  and  Federal 
governments,  20 

in  New  York  City,  28 

inheritance,  20 

lien  of,  24 

on  corporation  franchise,  21 

on  transfers  at  death,  20 

when  payable  in  New  York,  29 
Tax  summary  of  New  York  City,  30, 

31,  32,  33 

Tenancy  in  common,  12 
Tenants,    rights    to    be    considered    at 
time  of  sale,  115 

relation  with  agent,  157 

security  furnished  by,  131 

rights   to  be  considered   in   making 
contract  for  sale  of  property,  49 
Terms  of  sale  at  auction,  67 

at  voluntary  auction,  70 
Testimony  clause  in  deed,  78 
Title  and  title  insurance,  101 
Title  to  real  property,  12 

assurance  of,  81 

by  adverse   possession,   104 

by  descent,  12,  102 

by  involuntary  alienation,  12,  103 

by  voluntary  alienation,  12,  103 

by  will,  102 

closing  of,  114 

examination  of,   106 

form  of  certificate  of,  203 

history  of  transfer  of,  101 

recording  of,  104 

rejection  of,  120 
Title  book,  206 
Title  insurance,  107 

contents  of  policy  of,  109 
Title  registration,  contents  of  petition 
for  204 

fee  for,  207 

in  New  York,  203 

system  in  England,  200 

Torrens  System  of,  200 
Torrens  System  of  land  title  registra- 
tion, 200 

advantages  of,  208 

objections  to,  209 
Town  tax,  24 
Transfer  tax,  20 

Transferring  property,  methods  of,  102 
Trust  mortgage,   17,   97 


342 


Uniform  contract,  198 
Usury,  88 


INDEX 


of 


Valuation,    illustration    of   method 

computing,    166  -y 
of  building,  169  / 
of  improved  property,   167 
of  land,  general  rules  for,  160 
of  property  for  tax  purposes,  25 
of  real  estate,  158 
rent  a  measure  of,  158 

Value,  computed  from  rentals,  170 
effect  of  width  and  shape  of  lot  on, 
164 


influence  of  corners  on,  165 

unit  of,  163 

Violations   of   existing   ordinances,    57 
Voluntary   alienation,  passing  of  title 

by,  12,  103 
Voluntary  auction  sales,  65,  70 

terms  of  sale  at,  70 

W 

Warranty  covenant,   82 

Water  rates,  24,  36 

Water  taxes,  apportionment  of,  56 
covenant  in  mortgage  to  pay,  93 
disposition  of  at  auction  sale,  69 

Witnessing  contract  of  sale,  59 

Witnessing  deed,  79 

Will,  passing  of  title  by,  12,  102 


v  r 


14  DAY  USE 

RETURN  TO  DESK  FROM  WHICH  BORROWED 

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This  book  is  due  on  the  last  date  stamped  below,  or 

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Renewed  books  are  subject  to  immediate  recall. 


LD  21A-50m.-12,'60 
(B6221slO)476B 


General  Library 

University  of  California 

Berkeley 


YC  26850 


THE  UNIVERSITY  OF  CALIFORNIA  LIBRARY 


